On Thursday, Wells Fargo announced that one of its principal regulators has lifted a significant penalty associated with its 2016 fake accounts scandal. The bank revealed in a statement that the Office of the Comptroller of the Currency (OCC) has terminated a consent order, which mandated a restructuring of its retail product and service sales practices.
Following this announcement, the bank’s shares surged by over 6%. Since 2019, Wells Fargo, a prominent retail bank in the United States, has resolved six consent orders, coinciding with the tenure of CEO Charlie Scharf.
However, eight additional orders remain outstanding, notably including one from the Federal Reserve that imposes limits on the bank’s asset size, according to a source familiar with the situation.
In an internal memo to employees, Scharf characterized this development as a “milestone” for the institution. The scandal in 2016, involving the unauthorized creation of over 3 million accounts, triggered intense scrutiny, exposing issues related to mortgage servicing, auto loans, and other consumer accounts.
The repercussions tarnished the bank’s image and led to the departures of both former CEOs, John Stumpf in 2016 and his successor Tim Sloan in 2019.
“The OCC’s action confirms that we have effectively implemented new systems, processes, and controls to serve our customers differently today than we did a decade ago,” remarked Scharf. It is our responsibility to ensure we continue to operate with these disciplines.”
Analyst Gerard Cassidy from RBC noted in a research update on Thursday that the termination of the OCC order “paves the way” for the eventual removal of the Federal Reserve’s asset cap.
