California’s state treasurer has slapped a one-year ban on doing business with Wells Fargo and called for chief John Stumpf to resign, joining a chorus of disapproval for the bank at the centre of a deepening sham-account scandal.
Three weeks ago Wells was fined $185m by US regulators for allowing employees to open as many as 2m accounts that customers did not authorise. The bank has since scrapped its sales goals and docked more than $40m from the pay of Mr Stumpf, its chief executive since 2007 and chairman since 2010, in an attempt to defuse a mounting political row.
But on Wednesday John Chiang, treasurer of Wells’ home state, dismissed the moves, saying he would suspend all of the bank’s business relationships with his office for a year, while he monitored its compliance with sanctions imposed by regulators including the Consumer Financial Protection Bureau.
In an open letter to Mr Stumpf and the board, he also said he would use his seat on the boards of the country’s two largest pension funds — the California Public Employees’ Retirement System and the California State Teachers’ Retirement System — to push for governance reforms at the bank, which until this month ranked as the world’s largest by market capitalisation.
In particular, he said, he wanted Wells to split the roles of chairman and chief executive, review its compensation practices, set up a programme to protect whistleblowers and consider clawbacks of pay for executives most closely linked to the “predatory” sales practices.
The revelations that Wells “fleeced” its customers demonstrated “at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed”, he wrote.
Wells said: “We certainly understand the concerns that have been raised. We are very sorry and take full responsibility for the incidents in our retail bank. We have already taken important steps, and will continue to do so, to address these issues and rebuild the state’s trust.”
Mr Chiang’s outburst marks a significant escalation in the controversy surrounding Wells Fargo, which has faced a number of lawsuits by fired or demoted workers, customers and investors since the scandal broke.
The loss of the California business — even for a year — is a blow to the bank, which was founded in the gold-rush port of San Francisco and has made much of its history as a courier service between America’s east and west coasts, turning to banking because customers wanted financial services. Wells served as the lead underwriter of five of the past 13 bond offerings from California this year, for example, according to Bloomberg, and also acts as a broker-dealer for the state’s $75bn investment pool.
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The state would buy no more of the stock or bonds of Wells Fargo, Mr Chiang added, until it was satisfied that measures had been taken to avert a similar scandal in future.
Wells’ spokesperson said the bank had worked “diligently and professionally . . . with the state for the past 17 years to support the government and people of California. Our highly experienced and proven government banking, securities and treasury management teams stand ready to continue delivering outstanding service.”
Mr Chiang, who is running for state governor in 2018, has taken aim at big banks before. In May last year, just a few months into his stint as treasurer, he responded to reports of money-laundering and tax evasion by the US arm of HSBC by banning the bank from handling California’s $6.5bn in deposits.
In a press conference on Wednesday, he said that Mr Stumpf should leave as soon as possible. “Just as Lehman Brothers and Bear Stearns learned the hard way that no bank is truly too big to fail, those banks which survived the Great Recession must now learn that they are not so powerful as to be untouchable,” he said.