Just when you thought Wells Fargo was finally putting its unpleasant regulatory transgressions behind it once and for all, today Bloomberg reported today that regulators aren't happy with how quickly the bank is paying restitution and cleaning up its act. This, in turn, could lead to even more regulatory action heading the bank's way. The news sent Wells stock tumbling more than 5% on the day.
The bank has already paid more than $5 billion due to its various fraudulent cross-selling scandals which cost the former CEO his job, but the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau are warning the company that new sanctions could be on their way due to how slowly the bank is fulfilling consent orders it signed about three years ago, according to a new article by Bloomberg.
If new sanctions point out wrongdoing by the company's new management team, which took over in 2019, it could restart the clock on a Fed cap on the bank's growth.
The bank has already paid out restitution to millions of consumers, but it is having trouble identifying which customers were affected and how much they are owed, the report says. Now, regulators are mulling new fines and/or sanctions, or potentially even additional consent orders.
Clues have started to emerge over the past few months that all wasn't well with regulators, the report says. The bank disclosed in regulatory filings that it could face new consent orders and Scharf has said there could be "setbacks" in attempting to fulfill the needs of regulators.
New Chief Executive Officer Charlie Scharf has said that his sole goal has been satisfying regulators, recently adding that “while what’s required for each is clear, there are numerous complexities with managing this amount of work concurrently. It will take time to consistently accomplish all at the level we and our regulators expect.”
The implications for the bank could be far reaching, should regulators decide to sanction it again. Not only would the optics be ugly, as the bank has spent the last 3 years on a PR campaign to make it look like it is cleaning up its act, but additional sanctions could also throw a wrench in the gears at the other inner-workings of the bank, as we noted on Twitter today.
If Wells is hit with another regulatory action which limits its balance sheet, that would be especially problematic for tapering as it is one of the few banks with capacity to buy TSYs— zerohedge (@zerohedge) August 31, 2021