Who Checks Wells Fargo
Bank supervisors can now fire managers at Wels Fargo
New York This out of court settlement should make banks sit up and take notice. Wells Fargo not only pays a billion dollar fine to two different US overseers to correct systematic misconduct in opening accounts and granting car loans and mortgages. The bank also grants one of them the right to fire top managers and directors if the bank does not improve.
That is an important signal. Punishment alone - as the financial crisis has shown - is not enough to act as a deterrent. But when those in charge know they are risking their job, reputation and career, offenses get the right height.
Sure, Wells Fargo has already had to replace the boss in the wake of various scandals. But long-time CEO John Stumpf resigned only after a disastrous hearing in the Senate, and not because he wanted to take responsibility for the roughly three million customers affected by the scandals.
America’s third largest bank now has two unusually tough requirements. The US Federal Reserve, which is also an important bank regulator, put it on a growth lock in February. The San Francisco-based institute’s total assets cannot exceed two trillion dollars. That is the level at the end of 2017. OCC, the regulator responsible for the credit system, can in future dismiss managers and board members and reject their possible successors.
It borders on irony that precisely the bank is now being punished so severely that has for years pretended to be particularly honest. But it's refreshing to see US regulators finding new ways to do their jobs, even under the bank-friendly Trump administration. It's just a shame that the OCC has not already made use of its new personnel power.
However, the model should also inspire other overseers. Not just in the US and not just in the financial sector.
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