BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
(Reuters) — Wells Fargo & Co. detailed new regulatory restrictions imposed by the U.S. Federal Reserve on Friday that sent its shares down sharply in after-hours trading, as the third-largest U.S. bank continues to reel from a sales scandal that erupted in 2016.
Wells is not allowed to grow beyond the $1.95 trillion in assets it had at the end of last year "until it sufficiently improves its governance and controls," the Fed said in a statement.
Wells Fargo estimated that the cap will cut its annual profit by $300 million to $400 million this year, as it reduces some parts of its balance sheet, like corporate deposits and trading assets, in order to continue growing core businesses. That represents 1.5% to 1.9% of the profit Wells generated in 2017.
The bank will also replace three board members by April and a fourth board member by the end of the year, the Fed said, without naming who they should be.
Wells Fargo shares fell 6.1% to $60.10 in after-hours trading.
The Fed’s consent order will have a “manageable” impact on profits and should not affect the bank’s plans to return capital to shareholders this year, CEO Tim Sloan said during a conference call with analysts on Friday evening.
“We are in a very competitive business whether we have a consent order or not,” said Mr. Sloan. “Our marching orders to our team are, go out and serve your customers, fulfill our vision, take deposits, make loans. We are open for business.”
While Mr. Sloan said he takes the matter seriously, he also characterized it as the latest step in a risk management and corporate governance overhaul that Wells Fargo began some time ago, when it realized it had a serious problem with sales practices.
The bank reached a $190 million settlement with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and a Los Angeles prosecutor in September 2016 over employees opening phony accounts in customers’ names without their permission to artificially hit internal targets. The tally of fake accounts has since risen to as many as 3.5 million.
Regulators have rarely intervened directly in a bank's operations in the past, and it is unprecedented for the Fed to order a bank to stop growing altogether, officials said.
But Wells Fargo's aggressive business strategy prioritized growth over effective risk management, leading to serious compliance breakdowns, the central bank said.
Wells Fargo's balance sheet expanded steadily from the end of 2013 to 2016, but growth slowed dramatically last year as it battled to address the issues raised by the scandal.
The bank must submit a plan to the Fed within 60 days detailing how it has enhanced oversight from its board of directors and improved compliance and risk management functions, and how it plans to improve further. Once the Fed approves those plans, Wells will hire third-party consultants to review them and monitor its progress until the regulator is satisfied.
The San Francisco Fed and top regulatory officials in Washington will lead the review, the central bank said.
"We cannot tolerate pervasive and persistent misconduct at any bank,” said Chair Janet Yellen in a statement on her final day as leader of the central bank.
Since the 2016 settlement, Wells has taken steps to enhance oversight at the board level, centralize risk management functions and install new executives to oversee key businesses and control functions. Its board chair, Betsy Duke, is a former Fed governor, and it recently hired Sarah Dahlgren, a former New York Fed official, as its head of regulatory relations.
(Reuters) — A federal judge said current and former Wells Fargo & Co. officers and directors, including CEO Tim Sloan, must face nearly all of a lawsuit by shareholders seeking to hold them personally liable for sales abuses and the creation of millions of unauthorized accounts.