This is a positive development for Wells Fargo, which has dedicated nearly a decade to demonstrating to the public and regulators that it has made significant improvements.
“We are a different and far stronger company today because of the work we’ve done,” stated Wells Fargo CEO Charlie Scharf. He also revealed that all 215,000 employees at Wells Fargo would receive a $2,000 bonus for their role in the bank’s turnaround.
Wells Fargo previously fostered a corporate culture that pressured branch employees with excessive sales targets, leading to the creation of millions of unauthorized accounts to reach those targets. The bank’s top executives referred to its branches as “stores,” where employees were expected to cross-sell numerous banking products, regardless of customer need or desire.
Following a 2016 investigation by The Los Angeles Times, Wells Fargo dismantled its sales culture and dismissed much of its leadership and board. The fake accounts scandal resulted in billions of dollars in fines and losses, severely damaging the bank’s reputation, especially since it unfolded shortly after the Great Recession and financial crisis. It was eventually disclosed that roughly 3.5 million unnecessary accounts had been opened.
Once regarded as the best-managed bank in the nation, Wells Fargo became emblematic of the most egregious banking practices in decades.
To compel Wells Fargo to enact reforms, the Federal Reserve implemented an unprecedented program limiting the bank’s growth to its 2018 size, known as an asset cap. This action was unique, as no other bank had previously faced such restrictions. The Fed mandated that Wells address its cultural issues and overhaul its risk and compliance departments.
Scharf’s objective since assuming leadership in 2019 has been to persuade the Federal Reserve that Wells Fargo has rectified its harmful banking practices. With the removal of the asset cap, the bank is now poised to seek more deposits, open new accounts, and expand into additional investment banking activities by holding more securities on its balance sheet.
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