Wells Fargo Scandal Weighs Heavily on Other Big Banks
It’s the topic the banking industry can’t avoid, even when people prefer not to mention it by name: Wells Fargo.
Banking executives and consultants who normally focus on checking accounts and credit cards spent a recent conference talking about “cross-selling” and “incentive compensation.” Those are code words for Wells Fargo, and the up to two million accounts that its employees opened without customer permission as they sought to meet unrealistic sales goals, AP reported.
And circulating among Wells Fargo’s biggest competitors is the scathing report from the bank’s board of directors that laid blame for its toxic sales practices on negligent management.
Eager not to be the next Wells Fargo, some other big banks say they are examining their own practices against the board report and actively looking for ways to avoid any sales issues before becoming engulfed in a similar kind of scandal.
“Any major occurrence in the industry is going to impact us all,” said Richard Hunt, president of the Consumer Bankers Association, the trade and lobbying group that organized the recent CBA Live gathering.
Wells had by far the most aggressive sales goals among the big banks, and the board’s report said the problems date back at least 15 years—but that executives had little interest in dealing with the issue until it spiraled out of control. The board also reclaimed another $75 million in pay from former CEO John Stumpf and former community bank executive Carrie Tolstedt, saying they dragged their feet for years.
That report has been making its way through top executive offices at nearly every big bank, executives said.
JPMorgan Chase’s upper management is reviewing the report, Chief Financial Officer Marianne Lake said last week. The same is happening over at Citigroup. Both banks have looked at their own sales behavior, and say they found nothing amiss. Bank of America Chief Financial Officer Paul Dinofrio declined to say whether executives reviewed the report, but stressed “we feel good about our sales practices.”
For the industry, the next potential shoe to drop will likely be from federal bank regulator the Office of the Comptroller of the Currency, whose bank examiners are currently combing through each of big bank sales programs. Their findings are expected this summer. And the Consumer Financial Protection Bureau is also doing its own investigation.