The financial sanctions imposed on Wells Fargo by California will continue for a second year after more bad practices at the bank were disclosed in the wake of the sham accounts scandal. According to the California state treasurer, John Chiang, new revelations in recent weeks showing that the bank had engaged in more wrongdoing had resulted in a loss of confidence in the lender which is based in San Francisco. Chiang, who is also running for governor of the state, accused the bank of failing to complete the necessary reforms.
“The opaque manner with which the bank continues to do business and the frequency of new disclosures of wanton greed and lack of institutional control makes this decision so clear that there really was no choice at all,” said Chiang in a statement.
Investments in securities
The sanctions will see the Treasurer’s Office suspend investments in securities offered by Wells Fargo. They will also bar the use of Wells Fargo as a broker-dealer with regards to the buying of investments. Additionally the San Francisco-based bank will be barred from acting as a bond sale managing underwriter in situations where the authority of appointing the underwriter rests with the Treasurer.
The sanctions were initially slapped on Wells Fargo last year in September and this was a few weeks after the lender had reached a $185-million settlement. The settlement was reached with regulators after the bank was found guilty of opening millions of unauthorized savings, checking and other accounts. A month after, the then-chairman and chief executive officer of the bank, John Stumpf, was forced to quit.
After the Treasurer indicated that the sanctions would continue for another year Wells Fargo claimed that the lender had met all of Chiang’s demands and actually exceeded expectations. The bank also pointed out that it had undertaken various reforms including having the position of chairman and chief executive officer separated. Wells Fargo also added that the complaint-resolution process of the bank had been expanded.
Among the new accusations levelled against the bank and which were cited by Treasurer Chiang include an allegation that veterans were overcharged by the bank in the federal mortgage-financing program. Borrowers of car loans were also charged for insurance they did not require. Chiang called for an expansion of the inquiry into the lender by federal regulators. For Chiang to retract the sanctions, the steps that the bank has to make include getting rid of the board members who were serving at the time the malpractices occurred.