Photo by Ken Teegardin/Flickr
Wells Fargo, a giant US bank, will be required to replace four of its board members after Janet Yellen, the outgoing Federal Reserve chair, criticised the bank for widespread consumer abuses.
Late last night, the Federal Reserve announced that Wells Fargo would not be permitted to increase the assets of the company “until it sufficiently improves its governance and controls.”
Wells Fargo has been shaken during recent years by revelations of fraud and unethical behaviour by its employees in its consumer banking operations in the United States, including opening millions of accounts in the names of its customers without their knowledge and the mis-selling car insurance.
The Federal Reserve is responsible for regulating the banking system in the United States. The agency slammed the failure of the board of Well Fargo to provide sufficient compliance processes in unusually strident terms, stating that it was focused on the company’s growth at the expense of proper management.
The Fed chair who leaves the post this weekend, Janet Yellen, stated: “We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again.”
The bank is one of the top 13 most systemically important banks in the world. The Federal Reserve said that by April, it would replace three of its current board members and a fourth of its board members by the end of this year.
In a statement, Wells Fargo said that it is “confident it will satisfy the requirements of the consent order.” The bank has only 60 days to report back to the Fed with the steps that it has taken to improve the processes of the firm.
Timothy Sloan, the chief executive of the bank, said that the order did not relate to any new issues regarding misconduct, and said that it had no direct bearing on the finances of the bank.
“The order is not related to Wells Fargo’s financial condition,” said Sloan. “We remain in a strong financial position and stand ready to serve the varied financial needs of our customers.”
The bank will be required to centralise its risk management functions and externally recruit for a new chief compliance officer, chief operational risk officer, and head of regulatory relations.
The Fed also distributed letters to each of the current board members of Wells Fargo and John Stumpf, the former chairman and chief executive, saying that they “did not meet supervisory expectations.”