facing a penalty and an enforcement action entailing business restrictions last week, Well Fargo & Company’s ( WFC Quick Quote WFC - Free Report) legal hassles are far from over. This is because, U.S. Senator Elizabeth Warren has addressed a letter to the Federal Reserve, urging the central bank to revoke Well Fargo’s license as a financial holding company.
The senator stated that the latest $250-million fine against the bank shows it to be an "irredeemable repeat offender". Hence, the company’s core traditional banking activities should be separated from its other financial services and Wall Street operations. This will ensure that the bank’s customers stay protected until its transition is completed.
Per a Bloomberg
article that quoted contents of the letter reported by the New York Times, Warren wrote, “every single day that Wells Fargo continues to maintain these depository accounts is a day that millions of customers remain at risk of additional negligence and willful fraud,” and “the only way these consumers and their bank accounts can be kept safe is through another institution—one whose business model is not dependent on swindling customers for every last penny they can get. The Fed has the power to put consumers first, and it must use it.”
In her letter, the senator also sourced a report from early 2018, stating that Wells Fargo’s regulatory rating had fallen lower than the level at which the bank could be considered “well managed.” Given the continuing problems, it was unlikely that the bank could have recently improved its rating.
Under the Bank Holding Company Act, if a financial holding company is unable to comply with these rules, the Fed might issue a notice asking the institution to undertake corrective steps to remedy its deficiencies.
In a separate news release, Wells Fargo cited progress made on its deficiencies and said “meeting our own expectations for risk management and controls — as well as our regulators’ — remains Wells Fargo’s top priority.”
Since legal hassles have been snowballing on the company, it has undertaken numerous initiatives and achieved regulatory milestones. Specifically, the company has bifurcated three business groups into five and created four Enterprise Functions to propel greater oversight and transparency. It also launched an enterprise-wide risk and control self-assessment program to evaluate operational risks and controls as well as design appropriate mitigating controls.
The company’s 2016 consent order, which was issued by the Consumer Financial Protection Bureau in relation to the bank’s retail sales practices, was terminated last week.
Moreover, this January, the Office of the Comptroller of the Currency (“OCC”) terminated a 2015 consent order related to the Wall Street giant’s Bank Secrecy Act/Anti-Money Laundering compliance program. In May 2020, the OCC upgraded the company’s Community Reinvestment Act rating to "outstanding".
Shares of the company have gained 17.1% over the past six months compared with 5.8% growth recorded by the
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Wells Fargo currently carries a Zacks Rank #3 (Hold). You can see
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Cadence Bancorporation ( CADE Quick Quote CADE - Free Report) entered separate arrangements with the U.S. Department of Justice (DOJ) and the OCC to pay more than $8.5 million.
DOJ stated in May that
State Street Corporation ( STT Quick Quote STT - Free Report) entered a deferred prosecution agreement and agreed to pay a criminal fine of $115 million to settle charges of deceiving its clients by secretly overcharging them for back-office expenses.