Verdict coming on OCC's supervision of Wells Fargo

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Last week, the Office of the Comptroller of the Currency rendered judgment on eight former high-level Wells Fargo executives. Still to come is a verdict on the agency’s supervision of the San Francisco bank.

For more than three years, the Treasury Department’s Office of Inspector General has been working on an assessment of the adequacy and timeliness of the OCC’s actions in connection with sales practices at Wells Fargo.

The watchdog, which opened its project just weeks after the Wells Fargo phony-accounts scandal erupted in 2016, has also been assessing the OCC’s supervision of incentive compensation at the $1.9 trillion-asset bank.

Richard Delmar, deputy Treasury inspector general, said in an email Tuesday that he expects the assessment to be completed in late spring and to be made public at that time. He said that the project’s scope covers more than eight years — from January 2009 to May 2017.

The IG’s assessment is likely to shine new light on an era in which many observers believe the OCC was too close with Wells Fargo. Since late 2016, that image has begun to change as the OCC has taken a series of public actions against the scandal-plagued bank.

The scope of the IG’s review overlaps with that of an internal review published by the OCC in April 2017.

In its 14-page report, the OCC acknowledged that it failed to investigate complaints about abusive sales practices at Wells Fargo despite first learning about potential issues more than a decade earlier. OCC examiners interviewed top Wells officials in 2010 about more than 700 whistleblower complaints regarding the gaming of sales incentives, but the agency did not open an investigation.

The inspector general’s assessment of the OCC’s supervision of Wells Fargo has taken an unusually long time to complete, said Jon Rymer, a former inspector general at the Federal Deposit Insurance Corp., though he noted that he does not know the full scope of the IG’s work.

Rymer said that an inspector general evaluation of regulatory oversight of Washington Mutual, which failed in 2008, took about 18 months to complete.

Spokespeople for the OCC and Wells Fargo both declined Tuesday to comment on the Treasury inspector general’s work.

This is not the first time that the Treasury IG has taken a look at the OCC’s relationship with Wells Fargo.

Back in 2006, the watchdog found that the OCC should have hit Wells with a public cease-and-desist order for repeated and severe problems in its anti-money-laundering program. Instead, senior OCC officials who had met with Richard Kovacevich, who was then the bank’s chief executive, overturned the recommendations of examiners and issued an informal enforcement action.

Wells Fargo’s next CEO, John Stumpf, gave a speech to OCC employees in 2011 in which he offered them advice. For instance, he urged examiners to raise issues early, escalate them to the highest levels in the bank, and continue to view banks as the agency’s partners, according to a recording of the speech that was reviewed by American Banker.

“Give us the recipe of how you look at us,” Stumpf said at one point.

Stumpf also complimented the OCC, while making unflattering comments about the Consumer Financial Protection Bureau, which was then in its infancy.

“There’s one agency that should be held up as a pillar of strength, a shining light for doing it right, and that’s the OCC,” he said. “We rely on your involvement, your advocacy and your support. That’s not happening at other agencies, other regulators.”

Several years later, the Treasury IG unearthed another instance of coziness between the OCC and Wells Fargo. The top OCC examiner of Wells Fargo improperly revealed the existence of a government investigation to the bank, according to an inspector general report.

The report, which followed a probe opened in 2017, also found that the OCC lacked clear guidance specifying what an examiner-in-charge at a particular bank can share with bank officials.

The OCC has taken a more adversarial public posture toward Wells Fargo since September 2016, when the bank agreed to pay a $185 million penalty to the OCC, CFPB and the City and County of Los Angeles in connection with unauthorized customer accounts.

Twelve days after that announcement, then-Comptroller Thomas Curry told Congress that the OCC was focusing on potential civil penalties against individual bank officials, including both fines and lifetime bans from the industry.

Those efforts culminated last week with the announcement that Stumpf agreed to pay a $17.5 million penalty and to be barred from ever working in banking again. Two other former Wells executives also settled with the OCC. And five more individuals, including former retail banking head Carrie Tolstedt, are now facing civil charges and potential fines totaling $37.5 million.

Since late 2016, the OCC’s actions against Wells Fargo have also included a $1 billion penalty, jointly imposed with the CFPB, in connection with the bank’s mortgage and auto-lending practices.

In an accompanying consent order, the OCC found that Wells had failed to implement and maintain a compliance risk management program commensurate with its size, complexity and risk profile, and required the bank to develop one.

In March 2019, the OCC issued an unusual public statement expressing disappointment with Wells Fargo’s performance under the agency’s consent orders. Wells Fargo’s then-CEO, Tim Sloan, resigned less than three weeks later.

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Regulatory actions and programs Enforcement actions Compliance Crime and misconduct John Stumpf Thomas Curry Carrie Tolstedt Tim Sloan OCC Wells Fargo