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US regulator reverses course, tightens controls on Wells Fargo after scandal
[WASHINGTON] A leading US bank regulator on Friday reversed course and positions the agency to claw back pay of former executives at Wells Fargo & Co after a phony-accounts scandal.
The lender must also now seek prior approval before naming new bank leadership, said the Office of the Comptroller of the Currency, the main regulator for federal banks.
Friday's move puts executive pay at Wells Fargo within reach at a time when some lawmakers complain bank bosses have not paid a fair price for their part in financial scandals.
Wells Fargo in September agreed to pay US$190 million to settle charges that bank employees opened as many as 2 million accounts without customers' knowledge.
The fraud went on for at least five years, said the San Francisco-based bank that fired 5,300 employees involved.
Congressional hearings followed news of the scandal and John Stumpf, the firm's chief executive officer, resigned.
In September, the OCC exempted Wells Fargo from some controls on "golden parachutes" in their agreement. The move Friday evening voids those earlier allowances and puts Wells Fargo under toughened standards for oversight, the OCC said.
"The OCC informed the Bank today that it has revoked... relief from specific requirements and limitations regarding rules, policies, and procedures for corporate activities," the agency said in a Friday evening statement.
A Wells Fargo official said on Friday that the bank is on track to restore its reputation and business. "This will not inhibit our ability to execute our strategy, rebuild trust and serve our customers," said spokeswoman Jennifer Dunn.
Mr Stumpf and Carrie Tolstedt, former head of retail banking, did relinquish about US$60 million in stock, in the wake of the scandal, according to a Reuters review of securities filings.
But the pair also stood to take home more than US$350 million in compensation, according to filings.
Friday's move is an about-face for the OCC which had settled the Wells Fargo matter without imposing the toughest controls on executive payouts.
Wells Fargo "is not subject to the limitation on golden parachute and indemnification payment," according to the September settlement.
That allowance on executive pay appears in an eight-page stipulation that also exempts the bank from "requiring OCC approval of a change in directors and senior executive officers." If the OCC has asserted its right to screen Wells Fargo executives it could have asked that incoming executives satisfy tests of "experience, character or integrity," according to banking rules.
Regulators gained the right to freeze executive payouts at troubled banks after the savings and loan crisis of the 1980s and 1990s but exemptions are common.
The OCC has granted an exemption on "golden parachute" standards roughly half the times it issued cease-and-desist orders this year, according to a Reuters tally.