Wells Fargo's List of Woes Grows -- WSJ
December 05 2019 - 3:02AM
Dow Jones News
Top regulator rebukes bank's HR operations as lender struggles
to put scandal behind it
By Rachel Louise Ensign
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 5, 2019).
Wells Fargo & Co.'s principal regulator has said the bank
has a massive backlog of employee human-resources complaints and
poor controls around pay, a rebuke that adds to the long list of
problems facing the lender's new chief executive.
The bank has been at pains to demonstrate since the October
hiring of Charles Scharf as CEO that it is making progress
repairing the regulatory messes that emerged after a 2016
fake-account scandal, which upended Wells Fargo's reputation as a
staid mortgage lender and forced out some of its top
executives.
The HR complaints came in a July letter from the Office of the
Comptroller of the Currency and laid out a lengthy to-do list,
people familiar with the matter said. Among the issues the HR
department needs to address, the regulator said, are thousands of
employee complaints, an inadequate policy for clawing back
compensation from executives and controls around pay that aren't
tight enough to ward off potential misconduct, the people said.
"We do not comment on specific regulatory matters, however,
Wells Fargo is making progress on our regulatory obligations but
more work needs to be done," a bank spokeswoman said.
Authorities said in September 2016 that Wells Fargo bankers
opened perhaps millions of accounts without customer knowledge or
consent. The scandal revealed an aggressive sales culture coupled
with incentives to push more products on customers.
Mr. Scharf is "already making significant changes," including
this week hiring Santander Holdings USA Inc. CEO Scott Powell as
chief operating officer to "focus on regulatory priorities and
improve our control and operations functions," said Arati Randolph,
the Wells Fargo spokeswoman.
Late last year, the bank put a top executive whose
responsibilities included HR on a leave of absence after the OCC
sent her and another executive letters accusing them of oversight
failures.
The OCC earlier this year considered the unprecedented step of
forcing changes to Wells Fargo's senior management or board, The
Wall Street Journal reported, power it has under a $1 billion
settlement it reached with the bank in 2018. The bank's previous
CEO, Timothy Sloan, stepped down in March, following a rare public
rebuke by the OCC.
In May, Wells Fargo's top OCC examiner spoke to a gathering of
hundreds of the bank's in-house lawyers, people familiar with the
matter said, and offered a blunt critique of the bank's
progress.
Wells Fargo's HR practices came under regulatory scrutiny
following the 2016 scandal, but the OCC raised the pressure earlier
this year, people familiar with the matter said. In the assessment
that followed, the regulator added new warnings known as "matters
requiring attention" to existing ones targeting the HR
operation.
In the letter outlining the warnings, examiners said the bank
had made some progress in fixing issues with compensation and
performance management that were the subject of an outstanding MRA,
the people said. But the regulator didn't lift the warning, saying
the bank failed to put in place adequate controls to ensure pay
practices didn't encourage wrongdoing, the people said.
Wells Fargo also lacked adequate procedures to claw back
compensation from executives suspected of wrongdoing, they
said.
Incentive pay and clawbacks were major issues in the sales
scandal. The lender's board determined that bonuses paid to
low-level employees for product sales encouraged them to open fake
accounts. The bank also was criticized for not forcing top
executives to give up pay when the scandal broke. (Two senior
executives eventually forfeited millions of dollars in
compensation.)
The OCC also called out the bank's backlog of 3,000 employee
complaints, the people said. These likely include complaints from
employees who say they were wrongfully terminated, which HR
staffers are supposed to investigate, one of the people said.
The bank has fired thousands of low-level branch employees as
part of its effort to get the fake-account problem under control.
Many say they were unfairly terminated and have since been
effectively blacklisted from the banking industry.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
December 05, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Sep 2023 to Sep 2024