NEW YORK Wells Fargo & Co., which has set aside the least money for legal costs among the four biggest U.S. banks, will conduct an internal review of its ethics as the industry grapples with a surge in investigations and lawsuits.
The analysis led by Christine Meuers, a deputy general counsel, will examine standards for how employees should act and procedures for handling conflicts of interest across more than 80 business lines, said Mary Eshet, a spokeswoman for the San Francisco-based bank. The review will start Jan. 1 and last 18 to 24 months, Eshet said.
Wells Fargo employs about 20,500 people in Charlotte, the banks East Coast headquarters. It is unclear how the review will affect employees and executives in the city.
Lenders in the United States and Europe are looking to head off regulatory scrutiny and legal challenges that have tarnished reputations and sapped billions of dollars in profit. Frankfurt-based Deutsche Bank said Monday that it hired a McKinsey & Co. risk specialist to bolster controls. JPMorgan Chase increased spending on internal oversight this year and assigned thousands of people to compliance roles.
Wells Fargos review will be handled by the newly formed Ethics Program Office, Eshet said. The lender, run by Chief Executive Officer John Stumpf, 60, has no plan to issue a report once the task is completed, Eshet said.
Wells Fargo has long had a strong code of ethics which has served us well, and ethical business practices are a cornerstone of our culture, she said in an emailed statement. The review is a self-initiated effort that builds on our strong track record of ethics and integrity to assess our current approach and make recommendations for continuous improvement.
The firms employees already are held to a 24-page code of ethics. For example, workers are barred from investing in or making a loan to a Wells Fargo customer or vendor unless it meets certain conditions, the document shows. Employees arent allowed to accept gifts valued at more than $200 from customers, subject to some exceptions.
Goldman Sachs started a business standards committee in May 2010 after the Securities and Exchange Commission sued the company for fraud. In creating the group, CEO Lloyd C. Blankfein, 59, said the New York-based bank recognized a disconnect between how we view the firm and how the broader public perceives our roles and activities.
Goldman Sachs report, published in January 2011, made 39 recommendations to restore the firms reputation and win client trust. Among the changes, the investment bank altered the way it discloses financial information. The company also settled the SEC claims, saying it made a mistake in disclosures while selling a mortgage-linked investment that soured.
Wells Fargo probably hopes its review will improve the companys standing with regulators and the public, said Nell Minow, founder and a director of GMI Ratings, which evaluates governance risks at public companies.
There are two reasons a bank would do this, she said. The more they can do to create credibility with regulators, the less regulators will feel like they have to come in and tell them what to do. The other is for their brand: with their own employees, their customers, the community. They understand that for commercial and political reasons, this is absolutely essential.
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