In what is surely going to be fresh troubles for the business, federal regulators in the US have imposed fresh sanctions on Wells Fargo (NYSE:WFC) because of the fake accounts scandal. According to the restrictions, the San Francisco-based banking and financial services company will have to seek prior approval before hiring or replacing new executives. Some other changes are going to be monitored as well.
Wells Fargo must now provide the regulators a written notice whenever they want to replace bank executives or a board member. However, the restrictions imposed this time are going to be applicable only for the bank. It will not apply for the parent business Wells Fargo & Co, which has a different board. The order did not make it clear whether the appointment of Timothy Sloan, the new CEO, done last month will be impacted.
Earlier Terms Being Revoked
OCC or the Office of the Comptroller of the Currency issued a statement, saying that some of the terms of an earlier verdict of September 8 were being revoked. That was a $185 million settlement because of the bank creating unauthorized customer accounts.
Parts of the agreement that shielded Wells Fargo now stand canceled. However, no statement that explains these cancellations was issued.
A Vote of No-Confidence on Wells Fargo
Wade Francis, who has been an examiner with OCC before, however, added that this move is rare, and is the same as a vote of no-confidence in Wells Fargo’s leadership. Francis said, “This is the OCC saying, we don’t trust you to run your business”. He is currently the president of Unicon Financial Services, a consultancy firm in Long Beach.
Wells Fargo has not issued a statement after the ruling was passed.
The ruling also included restricting the bank from application reviews of basic practices such as relocating or opening new or existing branches. They won’t be able to make golden parachute payments as well, where executives were paid to step down or when they were fired.
Observers were taken by surprise because these restrictions are usually imposed only on banks that are insolvent or troubled.
Wells Fargo (NYSE:WFC) has been in trouble ever since the fake accounts scandal came under the spotlight. Earlier this month, the bank confirmed the Securities and Exchange Commission was carrying out an investigation. The Department of Labor and the U.S. Department of Justice is also carrying out their own investigations.