Macro
Fed's Barr Queried on Bank Bonus Clawback Rule Delay
Warren presses Fed on delay in bank bonus clawback rule as FDIC, OCC advance on executive pay regulation.
Key Takeaway
- Senator Elizabeth Warren pressures Fed's Michael Barr on adopting a rule for banks to claw back executive pay for excessive risk-taking.
- The FDIC, OCC, and FHFA are moving forward with implementing the Dodd-Frank Act rule, which the Fed has yet to join.
- FDIC head Martin Gruenberg faces criticism and calls for resignation over workplace culture issues following a report on sexual harassment and discrimination.
Regulatory Spotlight on Bank Executive Pay
US Senator Elizabeth Warren has spotlighted the Federal Reserve's stance on a critical financial regulation issue, questioning Vice Chair for Supervision Michael Barr about the Fed's position on implementing a rule to claw back pay from bank executives who take excessive risks. This inquiry comes in the context of other regulators, including the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC), moving to revive a Dodd-Frank Act rule aimed at such clawbacks. Despite these moves, Warren pointed out during a Banking Committee hearing that the Fed "has not joined them yet," signaling a potential divergence in regulatory approaches.
FDIC, OCC, and FHFA Move Ahead
Earlier this month, the FDIC, OCC, and Federal Housing Finance Agency took significant steps toward enforcing the long-delayed clawback rule, which aims to hold bank executives accountable by potentially reclaiming some of their compensation if their actions lead to excessive risk-taking. This move represents a more assertive stance than a 2016 proposal, which would have left the implementation of clawbacks largely at the discretion of the banks themselves—a proposal that faced strong resistance from the banking industry.
FDIC Under Fire for Workplace Issues
Amidst the regulatory discussions, the FDIC has come under scrutiny for internal workplace culture issues. Martin Gruenberg, head of the FDIC, faced criticism from lawmakers during a second day of congressional hearings, focusing on a report by a law firm that detailed allegations of sexual harassment and discrimination within the agency. The report also raised questions about Gruenberg's suitability to lead the agency through a necessary cultural transformation. In response, Gruenberg apologized to staff and emphasized his commitment to overhauling the FDIC's workplace culture.
Management Quotes
Michael Barr, Vice Chair for Supervision at the Federal Reserve:
"We have further work to do."
Martin Gruenberg, Head of the FDIC:
"Apologized to staff and reiterated that he was moving quickly to overhaul the agency’s workplace culture."
