The head of Wells Fargo told lawmakers he was “deeply sorry” for the US bank’s phantom accounts scandal as Hillary Clinton said she was “deeply disturbed” by the bank’s conduct.
John Stumpf, the bank’s chairman and chief executive, was summoned to testify in Washington after regulators found that bank staff created as many as 2m fee-generating bank accounts and credit cards that consumers knew nothing about.
Yet he denied that the conduct of staff was part of an “orchestrated effort” when he faced the powerful Senate banking committee on Tuesday.
In an open letter to Wells customers ahead of the hearing, Mrs Clinton, the Democratic presidential candidate, wrote: “He owes all of you a clear explanation as to how this happened under his watch.”
“It’s hard to imagine that top executives were unaware of a problem that involved thousands of the firm’s employees. After all, they imposed sales targets and compensation incentives in ways that led to this behaviour,” Mrs Clinton said.
Mr Stumpf told the committee: “I want to apologise for not doing more sooner to address the causes of this unacceptable activity.”
Despite his contrition, his remarks stopped short of indicating he could leave Wells over the scandal, which has wiped about $18bn off the bank’s market capitalisation since it erupted almost two weeks ago.
He told the hearing there was no “orchestrated effort, or scheme as some have called it, by the company”.
“Wrongful sales practice behaviour goes entirely against our values, ethics and culture,” said Mr Stumpf, who has been chief executive since 2007.
His performance will be scrutinised closely by Wall Street. Investors have grown increasingly concerned about the fallout from the episode, which has cost Wells its status as the world’s most valuable lender.
Mr Stumpf faced a rough ride by the committee, whose members include the Democrat Elizabeth Warren, a forthright bank critic. She has already hit out at Wells’ “staggering fraud”. The committee is chaired by the Republican Richard Shelby.
Before the bank chief spoke, Sherrod Brown, the top Democrat on the committee, told the chief: “I was stunned when I learned of the breadth and duration of the fraud committed by Wells Fargo. I call it fraud because I got tired of the euphemisms a long time ago.”
The hearing highlights the continued risks to Wells — whose retail focus had helped it avoid the Wall Street scandals that engulfed its large peers — from the sham accounts scandal.
More than 5,000 staff lost their jobs over improper sales practices at Wells Fargo during a five-year period studied by regulators, who earlier this month slapped $185m in fines on the San Francisco-based bank. US prosecutors have since begun investigating.
The regulators Thomas Curry, comptroller of the currency, and Richard Cordray, director of the Consumer Financial Protection Bureau, are also testifying before the committee.
Shares in Wells rallied 1.6 per cent on Tuesday before the hearing got under way, paring losses since regulators made their disclosures to about 6 per cent.