A regulator’s surprise move last week to put tighter restrictions on Wells Fargo is adding to uncertainty over how much additional fallout lies ahead for the bank in its recovery from a fake-accounts scandal.
Industry experts also say the regulator’s action could increase pressure on the San Francisco-based bank to make more management and board changes in order to appease regulators and lawmakers.
The Office of the Comptroller of the Currency, which fined Wells for the scandal in September, announced on Friday fresh limits on the bank that weren’t part of the regulator’s original agreement. Among other provisions, the new conditions restrict Wells’ ability to award departing executives severance payments, known as “golden parachutes,” and require Wells to alert the OCC in writing before changing directors or senior executive officers.
In taking the step, the OCC revoked waivers it had granted Wells Fargo in its September consent order. The revocations, announced late Friday, caught Wells Fargo off guard and were a highly unusual move for the OCC, which has not disclosed what prompted the decision.
Independent bank analyst Nancy Bush said the OCC’s move could put more pressure on Wells to reveal how employees opened millions of accounts that customers may not have been authorized.
“I think what the OCC wants to see, and what I want to see frankly … is who did this. How did they do it, how did they keep on doing it for so long and what are you going to do to them if these people are still in the company?” Bush said.
She also said the regulator, whose head is appointed by the president, might have wanted to place the additional restrictions on the bank before Republican President-elect Donald Trump takes office.
In a report Monday that mentioned the OCC’s decision, Jaret Seiberg, an analyst with Cowen and Co., said Wells Fargo will remain under political and regulatory scrutiny for much of the coming year, as Republicans and Democrats look to keep “this controversy alive.”
Democrats have an incentive to investigate Wells Fargo, as that party’s base remains angry at big banks, the report says. The report also notes that Trump could use the Wells scandal as support for his populist message and his calls to repeal the 2010 Dodd-Frank financial overhaul law.
The OCC’s latest action against Wells Fargo follows criticism by some lawmakers that regulators should have acted sooner. An OCC spokesperson told the Observer Monday that after reviewing relief typically granted in its consent orders, “the agency determined it was not appropriate in this case and upon its authority revoked that relief.”
Wells Fargo said it continues to cooperate with the OCC and other regulators and will comply with the OCC’s new requirements. The bank also noted some of the changes it has made to fix problems, including naming a new head of community banking and eliminating product sales goals in retail banking.
Bank consultant Ken Thomas said Wells Fargo will continue facing pressure from prominent Democrats, especially Massachusetts Sen. Elizabeth Warren, until it takes more steps.
“People wanted real change. Did we have real change at Wells Fargo? No. Real change would be a totally new CEO from outside. Maybe some new board members,” Thomas said. “Wells Fargo is far from out of the woods.”