The Biden administration has eased some restrictions on Wells Fargo, saying the bank has sufficiently revised its toxic culture after years of scandal.
Wells Fargo’s stock soared Thursday on the news, with investors speculating that the bank, which has been under heavy regulatory thumbs for years, could restore its reputation and start growing again. did. In very active trading, the bank’s shares rose 7.2% to $52.04, closing at the highest level since March 2022.
The Office of the Comptroller of the Currency, the regulator for large national banks like Wells Fargo, on Thursday ended a consent order that had been in place since September 2016. The order required banks to overhaul the way they sell and service financial products to customers. Additional consumer protections and employee protections against whistleblowers.
The consent order comes after a series of newspaper and government investigations in 2016 found that Wells Fargo engaged in harmful sales practices that pressured employees to sell multiple products to customers even when they didn’t need the products. The order was issued after it was discovered that he had a culture of Employees working in bank “stores” rather than branches were forced to open millions of fraudulent accounts. Customers had their personal information stolen and their credit scores affected. Among the millions of customers affected, a disproportionate number were Americans who did not speak English.
The scandal has severely damaged the reputation of San Francisco-based Wells Fargo, which eight years ago was considered one of the best-run banks in the country by investors and analysts.
Since the scandal broke, Wells Fargo has overhauled its board and management team, paid more than $1 billion in fines and penalties, and spent eight years demonstrating to the public that its bad practices are a thing of the past. It’s here. The scandal led to unionization efforts at some branches as employees protested the way managers imposed unreasonable sales targets.
The Office of the Comptroller of the Currency said in a brief statement Thursday that Wells Fargo’s “safety and soundness” and “compliance with laws and regulations do not require continued order.”
The decision is a major victory for Wells Fargo’s management team and Charles Scharf, who took over as CEO in 2019.
“The confirmation from the OCC that we have effectively done what was needed is the result of the hard work of so many employees and everyone at Wells Fargo who has been instrumental in transforming the way we do business. I would like to thank Mr. Schaaf in a prepared statement.
Keith Horwitz, a banking analyst at Citigroup, said in a note that the OCC’s decision is “clear evidence” that Wells Fargo’s management is making the right decision to modify its culture. Ta.
The Fed’s consent order against Wells Fargo and its requirement that the bank not grow beyond its current size until it fixes its sales culture remains in place. The Fed declined to comment, but the OCC’s decision will likely put pressure on the Fed to make its own decision regarding restrictions on Wells Fargo.
Including the Fed’s order, Wells Fargo still has eight consent orders governing its operations. That’s down from 14 when Mr. Scharf took over the bank. Management says there is still work to do.
“We’ve changed the company in many ways,” Well Fargo Chief Operating Officer Scott Powell said in an interview. Mr. Powell joined the bank around the same time as Mr. Scharf.
We are achieving better outcomes for our customers and employees, and we continue to work to address outstanding risk issues. ”
