The Biden Administration lifts restrictions on Wells Fargo, signaling a turn-around in toxic culture
Banking giant Wells Fargo receives nod of approval from regulators, stocks surge
After years of scandals and a tarnished reputation, Wells Fargo, one of the nation’s largest banks, received a boost from the Biden Administration. The Office of the Comptroller of the Currency (OCC), the regulatory body overseeing major national banks, terminated a consent order that had been in place since September 2016. This move indicates that Wells Fargo has successfully addressed its toxic culture, causing stocks to rise sharply. Investors are now speculating that the once-troubled bank might regain its former stature and return to the path of growth.
Rebuilding trust through a tumultuous journey
Wells Fargo’s uphill battle to redeem itself began in 2016, when newspaper and government investigations revealed a poisonous sales culture within the bank. Employees, who worked in Wells Fargo’s “stores” rather than traditional bank branches, were under immense pressure to sell multiple financial products to customers, even when unnecessary. This led to the opening of countless unauthorized accounts, causing customers’ identities to be stolen and credit scores to be impacted. Non-English-speaking Americans were disproportionately affected by these unscrupulous practices.
The scandal severely damaged the bank’s reputation, which had once enjoyed high regard from investors and analysts as one of the best managed banks in the country.
Since the scandal broke, Wells Fargo has taken significant steps to redeem itself. The board of directors and management were overhauled, and the bank paid over a billion dollars in fines and penalties. Eight years of tireless efforts have been dedicated to assuring the public that these fraudulent practices are definitively in the past. Notably, the scandal even sparked unionization movements as employees protested against the implementation of unreasonable sales goals.
A pivotal moment for Wells Fargo’s redemption
In a concise statement, the Comptroller of the Currency affirms that Wells Fargo’s “safety and soundness” and its compliance with regulations no longer necessitate the existence of the consent order.
For CEO Charles Scharf, who assumed leadership of the bank in 2019, the news represents a significant triumph. Scharf released a prepared statement expressing his gratitude towards Wells Fargo’s employees and their unwavering commitment to transforming the bank’s approach to business.
Citigroup banking analyst Keith Horwitz hailed the OCC’s decision as “positive proof” that Wells Fargo’s management has consistently made the right choices in rectifying the bank’s troubled culture.
Continued hurdles for Wells Fargo
While the consent order from the OCC has been terminated, there is still a Federal Reserve consent order in effect, alongside a requirement from the Fed that prohibits Wells Fargo from growing larger until it repairs its sales culture. The response from the Federal Reserve is eagerly anticipated, as the pressure from the OCC’s decision is likely to bear on their own deliberations.
At present, Wells Fargo remains subject to eight consent orders governing its operations, a notable decrease from the 14 orders in effect when Scharf assumed his role as CEO.
