Remaining hurdles for scandal-hit Wells Fargo

REUTERS: Wells Fargo & Co and its officials have racked up well over US$4 billion (£3 billion) in penalties since a sales practices scandal erupted in 2016, and continues to face headwinds.

Here are some of the remaining shoes that have yet to drop:

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Probes: A number of federal agencies are examining the bank and its employees for potential wrongdoing.

The Department of Justice is looking into whether executives withheld details about fake accounts to the Wells Fargo board of directors and the Office of the Comptroller of the Currency, the lead regulator for national banks, Reuters has reported.

The US Securities and Exchange Commissions Philadelphia office, meanwhile, has been investigating whether Wells Fargo misled investors by inflating performance metrics and whether the bank penalised whistleblowers, Reuters also reported.

The Department of Labor is also examining whether the bank acted on staff whistleblower complaints.

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Consent orders: Wells Fargo is currently operating under roughly 14 consent orders with various regulators including the OCC, SEC, and the Consumer Financial Protection Bureau.

Under the orders, the bank will endure intense regulatory scrutiny until it proves it has fixed procedures that allowed employees to create potentially millions of unauthorised accounts, and sell auto insurance and other add-on products that customers did not want or need.

The orders also require Wells Fargo to repay customers for costs associated with its consumer abuses. So far the bank has paid out at least tens of millions of dollars in remediation.

Asset cap: The most notable consent order looming over the bank is the US Federal Reserves asset cap, which put an unprecedented growth restriction on the bank's balance sheet until it proves that it has overhauled its risk management and controls.

Since the asset cap was announced in early 2018, bank executives repeatedly extended the timeline for getting it removed and have since stopped giving any guidance on the issue.

On his first public call with the company earlier this month, new Chief Executive Charlie Scarf did not set a new timeline.

Community Reinvestment Act (CRA) rating: Even if Wells Fargo's asset cap is lifted, its growth could still be hampered by its CRA rating, which assesses how well banks service poorer communities.

In 2017, federal regulators downgraded Wells Fargo two notches to "Needs to Improve" from "Outstanding&qRead More – Source

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