Wells Fargo & Company has overcome a significant regulatory obstacle with the Office of Comptroller of Currency (OCC) terminating the consent order issued back in September 2016. This order was a consequence of the disclosure of millions of unauthorized accounts, revealing misconduct in the bank’s sales practices.
The consent order mandated WFC to overhaul its procedures for offering and selling products and services, urging the bank to comply with laws and regulations, and implement necessary changes under the close watch of its CEO, Charlie Scharf. The termination of the consent order underscores the bank’s commitment to progress and adherence to regulatory requirements.
Scharf expressed his satisfaction with this development, emphasizing the bank’s focus on implementing a robust risk and control framework suitable for its size and complexity. He credited the dedication of Wells Fargo’s employees for this achievement and acknowledged the ongoing transformation of the bank’s business processes.
Since the imposition of the consent order in 2016 and the imposition of various penalties and sanctions, Wells Fargo has been operating under a Federal Reserve-imposed cap on its asset size. Coupled with a string of pending legal cases, the bank has been under stringent regulatory scrutiny.
In September 2021, the bank faced restrictions on acquiring certain residential mortgage servicing, alongside a $250-million penalty due to shortcomings in its home-lending loss mitigation program. Moreover, in February 2020, Wells Fargo reached a $3-billion settlement with authorities probing its Community Bank sales practices.
Over the last six months, WFC’s shares have outperformed the industry, registering a 22.5% increase compared to the industry’s growth of 20%.
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WFC currently holds a Zacks Rank #3 (Hold). You can access the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial Misconduct by Other Firms
Recently, HSBC Holdings plc was fined £57.4 million by the Bank of England (“BoE”) for “serious failings” in protecting customer deposits between 2015 and 2022. This hefty penalty serves as a stark reminder of the severity of the lapses in HSBC’s measures.
The Prudential Regulation Authority of BoE pointed out HSBC’s failure to accurately identify deposits eligible for Britain’s Financial Services Compensation Scheme, which safeguards up to £85,000 in customer bank accounts.
In a separate incident, The Goldman Sachs Group, Inc. came under scrutiny for fees charged for futures trading following a whistle-blower tip. This development was first reported by Bloomberg, citing sources with knowledge of the matter.
The Commodity Futures Trading Commission authorized the issuance of warrants to GS to obtain information about fees charged for some futures block trades.
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