Share This Page

Wells Fargo Grapples With New Set of Management Restrictions

November 22, 2016 / Source: The Wall Street Journal

By EMILY GLAZER and RACHEL WITKOWSKI
Nov. 20, 2016 6:21 p.m. ET
Executives at Wells Fargo & Co. over the weekend were grasping to understand more-stringent management restrictions newly imposed on the bank by the Office of the Comptroller of the Currency.

The lender remained in the dark about both the reason for and implications of the banking regulator’s mandate, which was issued in a terse statement late Friday. The agency is now requiring the bank to get approval before making a wide range of business decisions or rewarding departing executives with severance payments.

The new restrictions reverse some freedoms the OCC initially granted in its September agreement with Wells Fargo that was part of a larger $185 million civil settlement with another regulator and a city official. The findings showed that Wells Fargo opened as many as 2.1 million accounts using fictitious or unauthorized customer information over five years.

The OCC had first issued a waiver to the San Francisco bank that provided relief from tight restrictions on the bank’s operations, such as needing to seek extensive approval for any change in its business plan, like opening a branch, as well as the hiring or firing of management and the board.

Those restrictions typically kick in when an enforcement action is issued for any bank, but the OCC often gives relief to large banks when it cites them so that the action doesn’t further impair the bank’s operations.

Now, though, Wells Fargo has to go through a much longer and cumbersome process to get OCC approval on any change in leadership or business plan. It is also restricted from executive severance payouts, sometimes called “golden parachutes.”

Bankers and advisers over the weekend were analyzing the OCC’s waiver change, saying it could have implications for other banks that often get multiple waivers in settlements with the OCC. It is unclear whether any new stance would impact other settlements that have already been signed.

“This could be OCC’s shot across the bow that firms shouldn’t be assuming that they will be allowed to continue to enjoy the benefits of those waivers,” said a person familiar with the OCC’s processes.

Spokespeople from the OCC couldn’t be reached for comment Sunday.

In a memo to employees Friday, Wells Fargo CEO Timothy Sloan said the updated OCC requirements are “not a result of any new event or issue,” according to a copy of the note reviewed by The Wall Street Journal. He added that the though the changes mostly relate to “procedural requirements,” the bank will continue to face challenges as it continues working to rebuild trust with customers, shareholders, employees and others.

Some people familiar with the OCC say the changes with the Wells Fargo settlement could have been provoked by public criticism that the OCC’s initial action was too soft, given the multiyear period that the alleged misconduct occurred and the fact that executives who have since left the bank still received tens of millions of dollars of compensation, despite a decision by Wells Fargo’s board that clawed back part of their pay.

Write to Emily Glazer at emily.glazer@wsj.com and Rachel Witkowski at rachel.witkowski@wsj.com