Four Wells Fargo board members forced to leave in Yellen’s parting shot
The Federal Reserve announced late last night that Wells Fargo will not be allowed to grow its assets "until it sufficiently improves its governance and controls".
Wells Fargo has been rocked in recent years by revelations of fraud and unethical behaviour by employees in its US consumer banking operations, including opening millions of accounts in customers' names without their knowledge and mis-selling car insurance.
The Federal Reserve, which regulates the US banking system, slammed the board's failure to provide adequate compliance processes in unusually strident terms, saying it was focused on growth at the expense of proper management.
Janet Yellen, the Fed chair who leaves the post this weekend, said: "We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again."
The bank, one of the top 13 most systemically important banks in the world, will replace three current board members by April and a fourth board member by the end of the year, the Federal Reserve said.
In a statement Wells Fargo said it is "confident it will satisfy the requirements of the consent order". The bank has 60 days to report back to the Fed with the steps it has taken to improve its processes.
The bank's chief executive,Timothy Sloan, said the order did not relate to any new misconduct issues, and said it had no direct bearing on the bank's finances.
"The order is not related to Wells Fargo’s financial condition," he said. "We remain in a strong financial position and stand ready to serve the varied financial needs of our customers.”
Wells Fargo will be forced to centralise its risk management functions and recruit externally for a new chief operational risk officer, chief compliance officer and head of regulatory relations.
The Fed also sent letters to each current Wells Fargo board member and former chairman and chief executive John Stumpf saying they "did not meet supervisory expectations".