US eases restrictions on Wells Fargo after years of strict oversight following scandal
NEW YORK (AP) — The Biden Administration is easing its restrictions on banking giant Wells Fargo, saying the bank has sufficiently fixed its toxic culture after years of scandals.
The news sent Wells Fargo’s stock up sharply Thursday as investors speculated that the bank, which has been kept under a tight leash by regulators for years, may be able to rebuild its reputation and start growing again.
The Office of the Comptroller of the Currency, the regulator of big national banks like Wells, terminated its consent order on Thursday that had been in place since September 2016. The order required Wells to overhaul how it sold financial products to customers and provide additional consumer protections, as well as employee protections for whistleblowers.
After a series of newspaper and regulatory investigations in 2016, Wells was found to have a poisonous sales culture that would pressure employees into selling multiple products to customers though such products were not needed. Millions of unauthorized accounts were opened, severely tarnishing the reputation of Wells Fargo, once among the most sterling in banking.
Since the scandal broke, Wells overhauled its board of directors and management, paid more than a billion dollars in fines and penalties, and has spent eight years trying to show the public that its bad practices were behind it. Employees have started unionizing at some branches, with little push back from management.
In a brief statement Thursday, the Comptroller of the Currency said that Wells Fargo’s “safety and soundness” and “compliance with laws and regulations does not require the continue existence of the Order.”
The decision is a major victory for Wells’ management and Charles Scharf, who took over as CEO in 2019.
“Confirmation from the OCC that we have effectively implemented what was required is a result of the hard work of so many of our employees, and I’d like to thank everyone at Wells Fargo involved for their dedication to transforming how we do business,” Scharf said in a prepared statement.
There remains in place a Federal Reserve consent order against Wells as well as a requirement by the Fed that Wells grow no bigger than its current size until it fixed its sales culture. The Fed did not immediately respond to comment, but the OCC’s decision is likely to pressure the Fed to make its own decision regarding its restrictions on Wells.
