John Stumpf, responding to allegations that Wells Fargo opened millions of unauthorized accounts, said his bank failed its customers and the American public.
In remarks prepared for the Senate Banking Committee, Stumpf said the scandal was not an "orchestrated effort" and that the company never wanted employees to open accounts that they didn't need or want.
"I am deeply sorry," Stumpf said in a copy of his testimony that was obtained by Bloomberg. Stumpf, chairman and chief executive officer, is scheduled to appear before the panel Tuesday in Washington.
"I am going to explain this morning what happened and what we have done about it," Stumpf said in the prepared remarks. "Wrongful sales practice behavior goes entirely against our values, ethics and culture."
(To read the full text of Stumpf's remarks, click here.)
The San Francisco-based bank agreed earlier this month to pay $185 million to the Consumer Financial Protection Bureau and other regulators to resolve claims that employees opened more than 2 million accounts that consumers may not have known about. Stumpf is testifying Tuesday before the committee, chaired by Republican Richard Shelby.
Other witnesses include U.S. Comptroller of the Currency Tom Curry, who said he's directing bank examiners to review sales practices at all "large and midsize banks," and could pursue its own enforcement action against individuals at Wells Fargo, according to prepared remarks. Consumer Financial Protection Bureau Director Richard Cordray is also scheduled to testify.
Stumpf's testimony walks through a timeline of the bank's own investigation into the matter and firing of employees. Efforts to detect and deter unethical conduct were put in place "out of concerns that some employees were not doing what was right," according to Stumpf. Starting in 2011, the bank assigned a dedicated team to monitor and root out sales practice violations. Sales employees began being terminated for misconduct as a result of the investigation. Starting in 2012, the lender began to reduce certain sales goals for compensation.
In 2015, an Office of the Comptroller of the Currency review of Wells Fargo's sales practices revealed shortcomings that prompted the agency to demand changes -- including telling the bank to compensate customers for any harm they suffered from bad sales practices, and that the company had to bring in an outside consultant to review what was going on, Curry said. Wells Fargo hired PricewaterhouseCoopers in August 2015 to help determine whether customers incurred financial harm, according to Stumpf.
"Despite all those efforts, we did not get it right," Stumpf said. "We should have done more sooner to eliminate unethical conduct and unintended incentives for that conduct to occur. Even one unauthorized account is one too many."
Stumpf also outlined other ways Wells Fargo has tried to prevent unauthorized accounts from being created, including working with regulators and creating a new branch compliance program.
Stumpf's testimony isn't likely to quell concerns lawmakers have about what the bank is doing to hold some of its top executives accountable. The remarks don't discuss executive compensation or give any information about whether the board plans to consider clawing back pay for some top managers, including Carrie Tolstedt, the retired executive who led the unit where the alleged misconduct occurred.
A group of Democratic Senators, led by Elizabeth Warren, last week wrote a letter to Stumpf asking questions about pay. The lawmakers singled out Tolstedt, writing that there appears "to be multiple grounds on which to trigger the clawback provisions to recoup some or all of Ms. Tolstedt's incentive rewards."
The OCC, which regulates Wells Fargo, began receiving complaints in 2012 from consumers and employees about "improper sales practices," Curry said. In his remarks, Curry said the agency has started "a review of individual misconduct and culpability."
The House Financial Services Committee, chaired by Jeb Hensarling, said last week it plans to conduct its own investigation and will hold a separate hearing later this month. Hensarling says he plans to request that Stumpf appear for that hearing too. Tolstedt as well as other corporate officers will be called for transcribed interviews, Hensarling said.