US bank regulator sharpens teeth on Wells Fargo, surprising critics

WASHINGTON: Long accused of being too soft, a US bank regulator has surprised its critics with tough treatment of scandal-ridden lender Wells Fargo, culminating on Thursday in more than US$58 million in fines against eight former executives at the bank.

Consumer groups had worried that the Trump administration's pick to lead the Office of the Comptroller of the Currency (OCC), Joseph Otting, would do little to change its reputation for leniency.

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A former chief executive of California's OneWest Bank, Otting as comptroller has referred to lenders as his "customers" and pursued rule changes pushed for by bank lobbyists.

But when it comes to Wells Fargo's sales practices, Otting has consistently been a harsh critic, driving penalties against the bank which have broken new ground.

One person with knowledge of the matter said Wells Fargo's failure to swiftly fix systemic misconduct has angered Otting, precisely because he spent decades as a banker and felt he was held to high standards.

"You would get far more significant penalties from someone who has been in the business and is disappointed in what Wells Fargo has done," said Thomas Vartanian, a law professor at George Mason University and former OCC official.

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On Thursday, the OCC banned former Wells Fargo CEO John Stumpf from the banking industry and fined him US$17.5 million to settle charges he failed to put a stop to sales misconduct – the most it has ever secured from an individual.

Among other former executives charged was retail banking head Carrie Tolstedt, who has not yet settled and is potentially facing a whopping US$25 million penalty.

After watchdogs including the OCC failed to charge senior Wall Street executives for their role in the 2007-2009 financial crisis, lawmakers have pressed them to hold more individuals responsible for corporate wrongdoing.

Proving personal culpability, though, is legally tough, which makes Thursday's charges all the more striking.

“The OCC actions are eye-popping in terms of the number and seniority of the individuals charged," said Erik Gerding, a law professor at the University of Colorado, adding there had not been such a high profile executive crackdown in recent memory.

Arthur Wilmarth, a law professor at George Washington University, said he was "surprised" the OCC had pursued such drastic charges. "It's fair to say they've always been viewed as probably the most bank-friendly regulator," he added.

On Thursday, Otting said in a statement that the charges "reinforce the agency's expectations that management and employees … provide fair access to financial services, treat customers fairly and comply with applicable laws."


In addition to Thursday's charges, the OCC fined Wells Fargo US$500 million in 2018 for product mis-selling, only the second time it has dished out a penalty of that size.

That settlement requires the bank to make extensive fixes and to repay harmed customers, an effort the OCC has been monitoring closely.

It also imposed novel restrictions on the bank by giving the OCC the right to remove current executives and to vet new ones.

Otting's frustration with Wells Fargo's slow progress on its remediation effort was laid bare in March last year.

Then-CEO Tim Sloan had just finished telling Congress the bank was back on track, when the OCC responded with a rare public rebuke saying it continued to be "disappointed" in the bank.

The comptroller's public loss of confidence in Sloan contributed to his abrupt deparRead More – Source

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