In a major setback for Wells Fargo & Company (WFC - Free Report) , the central bank has rejected its scandal prevention plans and demanded a stricter check over management. The news was reported by Reuters.
Wells Fargo had put forth the plan in April 2018, following which, CEO Tim Sloan and other executives had been in discussions with Fed officials over the ideal measures.
Per people with knowledge of the matter, Wells Fargo was supposed to have the plan “approved, implemented and an independent third-party review completed” by the end of September 2018. However, the bank has clearly missed the target date, which could have led to more penalties, but the regulator has instead decided to allot Wells Fargo more time to satisfy the settlement terms.
Delay in plan approval is likely to keep Wells Fargo’s asset growth restricted for a longer period. In order to get the cap lifted earlier, the bank will have to bolster its governance and controls.
Recently, the Sans Francisco-based bank sacked three dozen district managers on charges of failing to conduct proper oversight, which contributed to the major sales scandal. It was an attempt by Wells Fargo to convince regulators of the progress it’s making in bolstering the internal control systems.
However, the Fed might be requiring Wells Fargo to take some actions to monitor the senior management level.
Since the breakout of the bogus account openings scandal in late 2016, Wells Fargo has been getting involved in a number of probes, which are likely to keep its cost base elevated. However, the bank has diligently taken remedial measures and initiatives to keep afloat. Also, its cost-control plans might help it deal with the pressure on costs.
Shares of Wells Fargo have lost 8.2% over the past six months compared with 8.6% decline recorded by the industry it belongs to.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
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