What Wells Fargo CEO Sloan had to say about the Fed order
From the Charlotte Business Journal
Wells Fargo & Co. (NYSE: WFC) on Friday announced its agreement to a consent order with the Federal Reserve System, following the bank’s fake-accounts scandal uncovered a year and a half ago.
As part of the consent order, Wells Fargo is required to:
- Submit a plan to further allow the board of directors the ability to carry out oversight duties
- Submit a plan on how the bank will improve its compliance and operational risk-management program
- Pending approval from the Fed, bring in third parties to conduct a review of the plans by Sept. 30
- Keep asset limitation in effect until the review is completed
- Conduct a second third-party review after asset limitation is removed to assess the effectiveness of the risk management plans
The two plans must be completed within 60 days. Until the third-party review is completed, Wells Fargo is required to keep its total consolidated assets at about $2 trillion — the level as of Dec. 31, 2017 — thus stifling the bank’s growth until changes are made.
“It’s important to note that in the consent order, the Federal Reserve acknowledges the efforts that we’ve taken over the past 17 months to improve corporate governance and risk 4 management. However, they believe there is more work that needs to be done, and we agree,” says Wells Fargo Chief Executive Tim Sloan, who spoke to investors Friday via conference call.
In 2016, more than a million unauthorized accounts were discovered, created by employees without customers’ knowledge. Other customers were saddled with unneeded auto insurance. Wells Fargo has since sought to repair the situation through new sales tactics and revamping its risk management.
Some analysts view the Fed’s imposed consequences as unusually harsh, as the Fed has never imposed such strict growth restrictions on a major bank.
Sloan says the company will fully comply and continue efforts to correct the situation. He says Wells Fargo spent $3.9 billion in 2017 on risk and hired more than 2,000 external team members to risk-related roles over the past couple of years.
Sloan estimates the order will lead to a $300 million to $400 million hit in net income after tax in 2018.
Now replace four more directors: Fed
The Fed also announced Friday it would require Wells Fargo to replace four of the directors on its 16-member board this year — a move made in light of the board’s failure to oversee the company. The bank replaced six of its directors in the last year.
“I want to assure our customers, our team members, our communities and our shareholders that Wells Fargo is open for business,” Sloan says. “We take the consent order very seriously, and we will work diligently to fix the issues identified, and as a result we will be a better, stronger and more customer-focused company than ever before.”
Wells Fargo has its headquarters in San Francisco, but its East Coast hub is located in Charlotte. The bank reported $33.48 billion in local deposits as of June 2017.
