Rule lets FDIC recover pay from failed bank executives

WASHINGTON – Federal regulators will be able to take back two years of pay from executives held responsible for a large bank’s failure.

Executives deemed “negligent” and “substantially responsible” for a big bank’s failure can lose all of their compensation from the previous two years under a rule approved Wednesday by the board of the Federal Deposit Insurance Corp.

The rule is part of the financial overhaul that Congress passed last summer. One section of the law creates an orderly way to shut down large, failing banks to prevent a crisis from spreading. The process aims to eliminate the category of banks deemed “too big to fail” because their collapse could endanger the broader financial system.

Under the new rules, a teetering financial company can be taken over by the government, broken apart and sold off.

The rule allowing regulators to take back executive pay is part of those plans.