Wells Fargo CEO Tim Sloan Steps Down (#GotBitcoin?)
General counsel, C. Allen Parker, will be interim CEO as bank searches externally for permanent chief. Wells Fargo CEO Tim Sloan Steps Down (#GotBitcoin?)
Wells Fargo & Co. Chief Executive Tim Sloan stepped down Thursday, ending a 31-year career at the bank and a 2½-year slog to get it back on solid footing after a fake-account scandal badly damaged its reputation and standing with regulators.
C. Allen Parker, Wells Fargo’s general counsel, has been named interim CEO. Mr. Parker joined the bank in 2017 from law firm Cravath, Swaine & Moore LLP to help clean up after the 2016 sales scandal.
The nation’s fourth-largest bank said it would search for a new permanent chief executive from outside the company.
The change atop Wells Fargo could signal a reset of the bank’s plans to put its problems behind it. Many of Wells Fargo’s top executives, including Mr. Sloan, have spent decades at the bank, and critics have said those long-tenured leaders have hindered the company from adequately fixing deep-rooted issues.
Officials at the Office of the Comptroller of the Currency, one of the bank’s primary regulators, were recently debating the rare step of forcing changes to Wells Fargo’s senior management or board, The Wall Street Journal previously reported.
Mr. Sloan, 58 years old, informed the board on Tuesday of his decision to retire, according to a regulatory filing. He will receive the pay he has already been promised but won’t get any additional retirement payment, the filing said.
In recent weeks, Mr. Sloan has faced renewed pressure from regulators and lawmakers to get the bank’s problems under control. Washington’s frustration with Mr. Sloan played a major role in his decision to retire, people familiar with the matter said.
“I could not keep myself in a position where I was becoming a distraction.” Mr. Sloan said in a call with investors on Thursday.
The move marks a big and rapid reversal for Wells Fargo. In recent months, Mr. Sloan had said he wanted to stay on for at least another several years, and the bank’s board had continued to express support for its embattled chief.
At a charity luncheon earlier Thursday, Warren Buffett, whose Berkshire Hathaway Inc. is the bank’s biggest shareholder, said he supported Mr. Sloan “100%.” He added, “I don’t want his job.”
Board chairman Elizabeth Duke said the bank hadn’t reached out to any potential candidates. “We have a lot more work to do,” she said of the bank’s overall progress fixing itself.
Mr. Sloan said he spent his time as CEO trying to rebuild trust in Wells Fargo. “However, it has become apparent to me that our ability to successfully move Wells Fargo forward from here will benefit from a new CEO and fresh perspectives,” he said in a statement.
Mr. Parker is one of the few outsiders Wells Fargo has added to its top ranks since the sales scandal erupted.
Mr. Sloan approached him about serving as the bank’s top lawyer at the end of 2016, around the same time Mr. Parker wrapped up a stint as Cravath’s presiding partner. Mr. Parker had known Mr. Sloan for several years and had done legal work for the bank.
“There’s no doubt in my mind that it will be a highly challenging job,” Mr. Parker said at the time.
Until the 2016 scandal, Wells Fargo enjoyed a sterling reputation as a bank that dodged the worst abuses of the financial crisis. But by the time Mr. Sloan took over after the scandal broke, leading to then-CEO John Stumpf’s resignation, the bank’s folksy image was in tatters.
He quickly set out to repair it, launching a deep review of every business. Mr. Sloan knew the company well, having worked his way up through its wholesale-banking unit before serving as chief financial officer and, most recently, chief operating officer.
Yet problems continued to emerge throughout the bank. Nearly every one of its business lines is under investigation by a government agency, including the Justice Department and the Securities and Exchange Commission.
The bank also has struggled to put in place a new risk-management system—the infrastructure designed to catch and prevent problems that could harm customers. In an April 2017 report, Wells Fargo’s board said the bank had made a grave mistake letting business units police themselves.
The Federal Reserve took the rare step of capping the bank’s growth in February 2018, citing risk-management deficiencies. A few months later, the Consumer Financial Protection Bureau and the OCC imposed a $1 billion fine on the bank for misconduct in its auto- and mortgage-lending business. The OCC said it found risk-management deficiencies that “constituted reckless, unsafe or unsound practices,” leading to improper charges to hundreds of thousands of consumers.
Investors also have been skeptical. Wells Fargo’s shares rose about 8% during Mr. Sloan’s tenure, compared with a nearly 30% increase in the KBW Nasdaq Bank Index. The shares rose in after-hours trading Thursday, following Mr. Sloan’s resignation.
Mr. Sloan never managed to convince regulators and others in Washington that he was the right person to fix the beleaguered bank. “About damn time,” Sen. Elizabeth Warren (D., Mass.), who is currently running for president, tweeted Thursday following Mr. Sloan’s resignation. “Tim Sloan should have been fired a long time ago.”
Earlier this month, Mr. Sloan testified before the House Financial Services Committee and engaged in combative exchanges with Republicans and Democrats alike. Minutes after the hearing ended, the OCC issued a rare statement, saying it was “disappointed with [Wells Fargo’s] performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program.”
In a regulatory filing released the next day, Wells Fargo said its board awarded Mr. Sloan a 5% pay increase in 2018 from the prior year. House Financial Services Committee Chairwoman Maxine Waters (D., Calif.) called the pay package “outrageous and wholly inappropriate” and urged the bank to fire Mr. Sloan.
Scandals Tarnished Wells Fargo. Washington Claimed Its CEO.
Like his predecessor, Timothy Sloan faced tough questioning from Congress before his downfall
Washington has claimed its second Wells Fargo & Co. chief executive.
John Stumpf quit the bank 13 days after a brutal appearance before Congress. His successor, Timothy Sloan, lasted 16 days before stepping down.
When Mr. Stumpf went to Congress in 2016 after a sales scandal erupted at Wells Fargo, he blamed low-level employees and gave evasive responses. Eager to avoid his predecessor’s missteps, Mr. Sloan prepared for his most recent appearance before Congress by sounding out lawmakers and showcasing the bank’s efforts to regain customer trust.
But it was too late. By the time Mr. Sloan took his seat before the House Financial Services Committee earlier this month, Wells Fargo was on the outs with Washington. Problems had emerged across the bank’s other businesses, setting off a flurry of government investigations. The Office of the Comptroller of the Currency and the Federal Reserve, the bank’s main regulators, were losing patience.
The OCC was debating the rare step of forcing changes to Wells Fargo’s senior management or board, The Wall Street Journal has reported. The Federal Reserve was showing no signs it was ready to lift an unprecedented cap on the bank’s growth put in place a year earlier.
By stepping into the spotlight, Mr. Sloan invited a series of public condemnations from the OCC and Fed. It was an unusual, if indirect, show of force that effectively ended his career.
When Mr. Sloan entered the hearing room in the Rayburn office building on March 12, he shook hands with House Financial Services Committee members before taking his seat before the microphone.
In the weeks leading up to the hearing, Mr. Sloan had waged a charm offensive on lawmakers from both parties. He traveled from office to office, armed with presentations that showed improving customer-service and employee-satisfaction metrics.
All the big-bank CEOs had been summoned to the Hill after the Democrats gained control of the House of Representatives in November. But Mr. Sloan was the only one testifying alone; his counterparts were all set to appear together at a hearing in April.
The committee—led by California Democrat Maxine Waters—initially asked the CEOs of the six biggest U.S. banks to testify on March 12, people familiar with the matter said. A number of the banks declined, saying a date in April, when they planned to be in Washington for other meetings, would be better, the people said.
Wells Fargo said Mr. Sloan was available. The bank was eager to repair its relationship with Washington.
Rep. Waters had made it clear Wells Fargo would be a priority on her watch. A hearing date was set.
During the hearing, Mr. Sloan faced a barrage of tough questions from both sides of the aisle. He appeared worn but never lost his composure, saying repeatedly that the bank was trying hard to change its ways.
Rep. Waters got the last word, calling on the OCC to consider removing Mr. Sloan. Dogged by protesters in the audience, Mr. Sloan approached the dais to shake her hand.
Some lawmakers who had met with Mr. Sloan in the days before the hearing were frustrated by his answers.
Rep. Brad Sherman (D., Calif.) became irritated during the hearing after Mr. Sloan declined to take a position on legislation to protect consumers against unreasonable overdraft fees. “He bobbed and weaved and filibustered and wouldn’t give us a straight answer,” Mr. Sherman said in an interview.
Still, Mr. Sloan had avoided a repeat of Mr. Stumpf’s disastrous appearance before the Senate Banking Committee in 2016. But it didn’t move the needle with regulators.
Minutes after the hearing ended, the OCC released a rare statement rebuking the bank, saying it was “disappointed with [Wells Fargo’s] performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program.”
A week later, Federal Reserve Chairman Jerome Powell took aim at the bank’s system meant to prevent problems that could harm customers. The risk-management framework, he said, had experienced a “remarkably widespread series of breakdowns.”
Mr. Powell said the Fed wouldn’t lift the bank’s asset cap “until Wells Fargo gets their arms around this, comes forward with plans, implements those plans, and we’re satisfied with what they’ve done. And that’s not where we are right now.”
The harsh words from regulators left Mr. Sloan with little option but to resign, according to people familiar with the matter. He stepped down Thursday, and the bank’s board is looking for an outsider to take his place.
“I could not keep myself in a position where I was becoming a distraction.” Mr. Sloan said Thursday.
Within the bank, Mr. Sloan’s announcement was met with mixed emotions. Some took it as a sign that Wells Fargo was finally moving on from the fake-account scandal, people familiar with the matter said. In an internal note reviewed by the Journal, the bank’s top wealth-management executive advised employees to stay “calm and strong.”
Others were disturbed, the people said. Washington, they were convinced, had taken out the CEO of a private-sector company.
Banking Regulator Rebukes Wells Fargo’s HR Operations
OCC cited backlog of employee complaints and compensation structures that don’t do enough to prevent wrongdoing.
Wells Fargo & Co.’s principal regulator has said the bank has a massive backlog of employee human-resources complaints and poor controls around pay, a rebuke that adds to the long list of problems facing the lender’s new chief executive.
The bank has been at pains to demonstrate since the October hiring of Charles Scharf as CEO that it is making progress repairing the regulatory messes that emerged after a 2016 fake-account scandal, which upended Wells Fargo’s reputation as a staid mortgage lender and forced out some of its top executives.
The HR complaints came in a July letter from the Office of the Comptroller of the Currency and laid out a lengthy to-do list, people familiar with the matter said. Among the issues the HR department needs to address, the regulator said, are thousands of employee complaints, an inadequate policy for clawing back compensation from executives and controls around pay that aren’t tight enough to ward off potential misconduct, the people said.
“We do not comment on specific regulatory matters, however, Wells Fargo is making progress on our regulatory obligations but more work needs to be done,” a bank spokeswoman said.
Authorities said in September 2016 that Wells Fargo bankers opened perhaps millions of accounts without customer knowledge or consent. The scandal revealed an aggressive sales culture coupled with incentives to push more products on customers.
Mr. Scharf is “already making significant changes,” including this week hiring Santander Holdings USA Inc. CEO Scott Powell as chief operating officer to “focus on regulatory priorities and improve our control and operations functions,” said Arati Randolph, the Wells Fargo spokeswoman.
Late last year, the bank put a top executive whose responsibilities included HR on a leave of absence after the OCC sent her and another executive letters accusing them of oversight failures.
The OCC earlier this year considered the unprecedented step of forcing changes to Wells Fargo’s senior management or board, The Wall Street Journal reported, power it has under a $1 billion settlement it reached with the bank in 2018. The bank’s previous CEO, Timothy Sloan, stepped down in March, following a rare public rebuke by the OCC.
In May, Wells Fargo’s top OCC examiner spoke to a gathering of hundreds of the bank’s in-house lawyers, people familiar with the matter said, and offered a blunt critique of the bank’s progress.
Wells Fargo’s HR practices came under regulatory scrutiny following the 2016 scandal, but the OCC raised the pressure earlier this year, people familiar with the matter said. In the assessment that followed, the regulator added new warnings known as “matters requiring attention” to existing ones targeting the HR operation.
In the letter outlining the warnings, examiners said the bank had made some progress in fixing issues with compensation and performance management that were the subject of an outstanding MRA, the people said. But the regulator didn’t lift the warning, saying the bank failed to put in place adequate controls to ensure pay practices didn’t encourage wrongdoing, the people said.
Wells Fargo also lacked adequate procedures to claw back compensation from executives suspected of wrongdoing, they said.
Incentive pay and clawbacks were major issues in the sales scandal. The lender’s board determined that bonuses paid to low-level employees for product sales encouraged them to open fake accounts. The bank also was criticized for not forcing top executives to give up pay when the scandal broke. (Two senior executives eventually forfeited millions of dollars in compensation.)
The OCC also called out the bank’s backlog of 3,000 employee complaints, the people said. These likely include complaints from employees who say they were wrongfully terminated, which HR staffers are supposed to investigate, one of the people said.
The bank has fired thousands of low-level branch employees as part of its effort to get the fake-account problem under control. Many say they were unfairly terminated and have since been effectively blacklisted from the banking industry.