Legislation would bar bank board directors presiding over bank insolvencies from other bank boards

Banking Default and Bank Crisis or as Banks drowning in debt with financial instability or insolvency concept as an urgent business and global market problem as a 3D illustration.

Republicans Sen. Blaise Ingoglia and Rep. Dean Black have filed legislation barring service on a bank board of directors if an individual had been on the board of a bank that became insolvent.

The identical bills (SB 542/HB 543) would disqualify an individual from serving on another bank board of directors for five years after he or she had been on the board of directors of a bank that had become insolvent.

“Floridians deserve to have trust in our financial institutions,” said Ingoglia of Spring Hill. “It’s simply not fair that individuals that have contributed to putting deposits at risk be allowed to continue that behavior.”

The financial world experienced ten weeks of tumult earlier this year when three high-profile banks became insolvent and needed federal intervention. They were Silicon Valley Bank, based in the San Francisco Bay area; Signature Bank, based in New York; and First Republic, also based in San Francisco. The three failures were said to be related to risky business strategies and many feared it was the spread of a contagion throughout the banking system. 

The Silicon Valley Bank failure, involving about $209 billion in assets, accounts for the second-biggest bank failure in U.S. history and Signature Bank, with about $110 billion in assets, the third-biggest. The largest bank failure in history occurred in 2008.

“Under this bill, we will ban executives who have been party to any bank failure from serving on the board of a Florida bank,” Black, of Jacksonville, said in a prepared statement.

None of the recent failures involved Florida banks, but Ingoglia said his legislation was borne out of these recent situations.

The biggest failure set the Federal Deposit Insurance Corporation (FDIC) back some $20 billion, according to reports.

“It’s frustrating to watch banks operate recklessly and be bailed out by taxpayers, the federal government and the FDIC without any recourse,” Ingoglia said.

 Ingoglia said the legislation is “pro-consumer.”

It “ensures that bad actors who put taxpayers and depositors at risk cannot be in a position to do it again,” he said.