Many Minnesotans may not realize it, but Wells Fargo is very important to the Twin Cities economy even though it’s based elsewhere. And its brand value is continuing to deteriorate to the point where more people and organizations may soon opt to take their business elsewhere.
In 1998, Minnesota-based Norwest acquired Wells Fargo. It realized “Wells Fargo” was a stronger brand name and switched the new company’s name to Wells Fargo. And it consolidated headquarters at Wells Fargo’s existing San Francisco location. Since then, Wells Fargo jobs in Minnesota (mostly in Minneapolis) have grown from 13,500 to more than 20,000. And Wells Fargo’s $300 million investment in new office towers downtown Minneapolis clinched the deal that led to the new Vikings stadium.
But ethics problems that surfaced two years ago continue to show up within the organization. Last September, the L.A. Times (which deserves high praise for uncovering this years ago before regulators finally took action) did a “one-year-later” update about the original “scandal that led in a matter of weeks to the ouster of its chairman and chief executive, John Stumpf [a Minnesotan, by the way], and to a host of promised reforms, including the removal of onerous sales goals that were widely acknowledged to be the source of the problem.”
The newspaper wrote in September, “a year later, the scandal that started with outrage over sham accounts has ballooned and that sin is just one of many the San Francisco bank has either copped to or been accused of. An internal bank report reviewed by The Times shows that list could grow further still. The report…identifies several so-far undisclosed issues, all classified as ‘high risk.’ They include improper fees charged on some accounts that were closed when the holders either died or were declared legally incompetent, a practice that dates to at least early last year…”
Since then, other wrongs have surfaced and the board of directors and acting chair (former General Mills CEO Stephen Sanger) were harshly criticized by the SEC. And now today, a banking regulator’s review has concluded there weren’t “systemic issues” at other banks that were similar to Wells Fargo’s phony-account scandal. This points out that Wells Fargo’s ethics problems are serious in that they’re not an industry issue, it’s just Wells Fargo’s issue.
The review by the Office of the Comptroller of the Currency, undertaken to determine if similar problems ran deep at other banks, lasted months and looked at more than 40 large banks with a significant retail footprint, according to the Wall Street Journal. The review hasn’t been released publicly. But an OCC spokesman in a statement said it “identified some weaknesses in policies, procedures, and controls and in the risk governance framework addressing sales practices “at some banks.
An OCC spokesman said that where the agency did find questionable accounts at other banks, the causes included “short-term sales promotions without adequate risk controls, deficient account opening and closing procedures, or isolated instances of employee misconduct with no clear connection to sales goals, incentives, or quota programs.”
Most banks have taken “timely actions” to address the regulator’s perceived weaknesses, the spokesman added, saying “systems and controls in these banks are now better integrated and more apt to identify inappropriate sales activities in a timely manner.”
For more on the latest, visit the Wall Street Journal.