Wells Fargo on Tuesday disclosed that the regulator of national banks downgraded the bank’s latest Community Reinvestment Act rating to “needs to improve,” a new blow to a company seeking to recover from a phony accounts scandal.
The San Francisco-based bank said the Office of the Comptroller of the Currency cited its overall “Outstanding” performance on the exam’s individual components, but downgraded the bank’s final rating to the second-lowest of four ratings due to previously issued regulatory consent orders.
Created by Congress in 1977, the CRA requires banks to make loans in the communities where they do business, including low- and moderate-income neighborhoods. Wells said the latest exam, which covered 2009-2012, is the first time its final rating has been below “outstanding,” the highest overall rating, since 1994.
News reports in December said Wells Fargo was set to receive a “needs to improve” tag from the OCC, a change that would give regulators greater say on day-to-day matters like opening new branches.
In its latest exam, the bank said it received an “Outstanding” on the lending test, an “Outstanding” on the investment test and a “High Satisfactory” on the service test.
“We are disappointed with this rating given Wells Fargo’s strong track record of lending to, investing in and providing service to low- and moderate-income communities. However, we are committed to addressing the OCC’s concerns because restoring trust in Wells Fargo and building a better bank for our customers and our communities is our top priority,” said Tim Sloan, Wells Fargo’s CEO, in a statement.
Paulina Gonzalez, executive director of the California Reinvestment Coalition, said that Wells Fargo’s “double downgrade” was “absolutely appropriate, considering the harm caused by Wells’ practices and products in communities throughout the U.S., especially in low-income communities, and communities of color.”
In September, regulators fined the bank $185 million to settle allegations that its employees opened as many as 2 million fake accounts in order to meet high-pressure sales goals. The OCC was among authorities that fined Wells Fargo, and last year it announced new limits on Wells’ activities, including restricting the bank’s ability to award departing executives severance payments.
The bank has been taking steps to reform its sales practices, including eliminating sales goals and replacing some executives. Charlotte-based executive Mary Mack is now leading the community bank where the activity took place.