Wells Fargo now needs to get to get approval from regulators before making changes in its board of directors or with senior executives as well as in making “golden parachute” payments to employees headed for the exit, the Office of the Comptroller of the Currency announced late Friday in revoking some provisions of its original settlement with the bank.
The bank will “face hurdles to making major purchases, such as buying large loan portfolios or other companies,” observes Bloomberg’s Jesse Hamilton.
Over the weekend, bank executives “were grasping to understand” the reason for the move, according to the Wall Street Journal’s Emily Glazer and Rachel Witkowski. The San Francisco-based “lender remained in the dark about both the reason for and implications of the banking regulator’s mandate, which was issued in a terse statement late Friday,” they write.
At the end of their story, however, Glazer and Witkowski suggest that the change “could have been provoked by public criticism that the OCC’s initial action was too soft, given the multiyear period that the alleged misconduct occurred and the fact that executives who have since left the bank still received tens of millions of dollars of compensation, despite a decision by Wells Fargo’s board that clawed back part of their pay.”
Wade Francis, a former OCC bank examiner, tells the Los Angeles Times’ James Rufus Koren that “the move amounts to a regulatory vote of no-confidence in the bank’s leadership,” which is now headed by CEO Tim Sloan and non-executive chair Stephen Sanger following John Stumpf’s resignation under fire in October.
“This is the OCC saying, ‘We don’t trust you to run your business,’” says Francis, president of Long Beach bank consultancy Unicon Financial Services. “They’re questioning the judgment of management.”
Reuters’ Patrick Rucker reminds us that “Wells Fargo in September agreed to pay $190 million to settle charges that bank employees opened as many as two million accounts without customers’ knowledge. The fraud went on for at least five years,” the bank said when revealing it had fired 5,300 employees involved with the tactics. Congressional hearings followed and Stumpf eventually quit but a “September settlement with Wells Fargo remained relatively lax.”
The bank revealed last Thursday that “account openings fell off a cliff” in October. “Checking account openings fell 44% since the same month a year earlier and 27% from a month ago, while new credit card applications also fell off 50% from the same month a year earlier and 35% from a month ago,” writes Lucinda Shen for Fortune.
The numbers “seem to indicate that Wells Fargo is no longer cross selling — though it's unclear to what extent the decrease in account openings resulted from Wells Fargo’s flailing reputation, or from the company’s decision to stop cross selling,” Shen observes.
San Francisco Chronicle columnist Thomas Lee says that the California Public Employees’ Retirement System (CalPERS), the nation’s largest public pension fund, “plenty of other investors,” including Warren Buffett’s Berkshire Hathaway and myriad regulators all appear to “have missed the massive corporate-governance failings at the bank.”
“It’s something that should have been caught” by investors, regulators and other groups, said Clifford Rossi, a former managing director and chief risk officer for Citigroup’s consumer lending unit, tells Lee. “It surprises me the fraud went on as long as it did.”
After the OCC announcement Friday, the bank maintained that it was headed in the right direction and would plow ahead.
“This will not inhibit our ability to execute our strategy, rebuild trust and serve our customers,” said spokeswoman Jennifer Dunn.