Senators want stronger ‘claw back’ rules

A group of 16 Senate Democrats asked the nation's financial regulators on Wednesday to strengthen proposed rules governing how companies revoke or 'claw back” pay from bank executives, saying the case of Wells Fargo & Co. illustrates the need for tougher policies.

The senators, led by Robert Menendez of New Jersey, sent a letter to regulators urging them to make several changes to pending rules, including adding a requirement that banks claw back pay from executives after misconduct is discovered.

For now, the rules say only that banks must have a policy that allows them to take back pay in such cases - not that they must actually do so.

In their letter, also signed by leading financial-industry critic Elizabeth Warren of Massachusetts, the senators said leaving those decisions to the banks themselves would not do enough to curtail the kind of misconduct uncovered at Wells Fargo, where thousands of employees created as many as 2 million accounts for customers without their authorization.

Executives knew about that practice for several years. The San Francisco bank revoked tens of millions of dollars in pay from now-retired Chief Executive John Stumpf and former retail bank chief Carrie Tolstedt, though they did not lose some pay or bonuses earned years earlier while unauthorized accounts were being created.

'We need tough rules that will ensure that executives who engage in this type of misconduct will have their bonuses clawed back so we can deter similar action in the future,” the senators wrote in their letter, which was sent to the heads of the Securities and Exchange Commission, the Federal Reserve, the Federal Deposit Insurance Corp. and other financial regulators.

The proposed rules must be approved by six regulatory agencies and, even if finalized this year, would not take effect until sometime in 2018.