Wells Fargo faces tighter controls as US regulator reverses course

A Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois, US. (Reuters)
Updated 19 November 2016
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Wells Fargo faces tighter controls as US regulator reverses course

WASHINGTON: A leading US bank regulator has reversed course and positioned the agency to claw back pay of former executives at Wells Fargo & Co. after a phony-accounts scandal.
The lender must also now seek prior approval before naming new bank leadership, said the Office of the Comptroller of the Currency, the main regulator for federal banks.
Friday’s move may target executive pay at Wells Fargo at a time when some lawmakers complain bank bosses have not paid a fair price for their part in financial scandals.
Wells Fargo in September agreed to pay $190 million to settle charges that bank employees opened as many as 2 million accounts without customers’ knowledge.
The fraud went on for at least five years, said the San Francisco-based bank that fired 5,300 employees involved.
Congressional hearings followed news of the scandal and John Stumpf, the firm’s chief executive officer, resigned.
Meanwhile, the September settlement with Wells Fargo remained relatively lax.
The OCC exempted Wells Fargo from some controls on “golden parachutes” in that agreement. The move Friday evening voids those earlier allowances and puts Wells Fargo under toughened standards for oversight, the OCC said.
“The OCC informed the Bank today that it has revoked... relief from specific requirements and limitations regarding rules, policies, and procedures for corporate activities,” the agency said in a Friday evening statement.
A Wells Fargo official said on Friday that the bank is on track to restore its reputation and business.
“This will not inhibit our ability to execute our strategy, rebuild trust and serve our customers,” said spokeswoman Jennifer Dunn.
Stumpf and Carrie Tolstedt, former head of retail banking, did relinquish about $60 million in stock, in the wake of the scandal, according to a Reuters review of securities filings.
But the pair also stood to take home more than $350 million in compensation, according to filings.

NEW TERMS

Friday’s move is an about-face for the OCC which had settled the Wells Fargo matter without imposing the toughest controls on executive payouts.
Wells Fargo “is not subject to the limitation on golden parachute and indemnification payment,” according to the September settlement.
That allowance on executive pay appears in an eight-page stipulation that also exempts the bank from “requiring OCC approval of a change in directors and senior executive officers.”
If the OCC has asserted its right to screen Wells Fargo executives it could have asked that incoming executives satisfy tests of “experience, character or integrity,” according to banking rules.
Regulators gained the right to freeze executive payouts at troubled banks after the savings and loan crisis of the 1980s and 1990s but exemptions are common.
The OCC has granted an exemption on “golden parachute” standards roughly half the times it issued cease-and-desist orders this year, according to a Reuters tally.

ANSWERS LAWMAKERS

In Congress, lawmakers urged Wells Fargo to come clean about the scope of the phony-accounts scandal.
Democrats on the Senate Banking Committee had asked Wells Fargo to share e-mails, memos and meeting minutes from the bank’s inner workings but the firm largely declined.
On Friday, those lawmakers published Wells Fargo’s response to dozens of questions about the scandal which the bank said it was still investigating.
Sherrod Brown of Ohio said he was not satisfied by the reply from Wells Fargo.
Wells Fargo did tell lawmakers that in 2012 there was an internal probe over problematic sales practices included examining whether accounts were “a poor fit for the customer.”
The settlement covered only accounts that may have been opened without customer authorization.
It did not address accounts that were authorized but might have been a poor fit.
“It seems unlikely that Wells Fargo can restore the trust of its customers if it continues to ignore or dodge basic questions about the causes and consequences of the fraud that it permitted for years,” Brown said in the statement.


Saudi Arabia real estate reform ‘on the right track,’ housing minister tells conference

Updated 51 min 7 sec ago
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Saudi Arabia real estate reform ‘on the right track,’ housing minister tells conference

  • Financial Sector Conference is designed to showcase Saudi Arabia’s finance industry to a world audience
  • The most eye-catching was a plan by the Saudi Real Estate Refinance Company (SRC)

RIYADH: Saudi Arabia’s real estate finance sector — crucial to the ambition of a home-owning economy under the Vision 2030 strategy — is maturing rapidly, a high-profile event in Riyadh heard on Wednesday.
“We’re on the right track,” housing minister Majid Al-Hogail told attendees on the first day of the Financial Sector Conference, designed to showcase Saudi Arabia’s finance industry to a world audience.
His comments came as financial institutions in the Kingdom announced a raft of measures to encourage more home ownership.
The most eye-catching was a plan by the Saudi Real Estate Refinance Company (SRC) — owned by the Public Investment Fund — to issue up to SR3.75 billion ($1 billion) worth of sukuk, or Islamic bonds, this year to finance home ownership plans.
Fabrice Susini, chief executive of the company, said SRC had spent SR1.2 billion buying mortgages from local mortgage finance companies and adding liquidity to these firms. SRC is often compared to US home finance group Fannie Mae.
Reform of the financial infrastructure of the property market is regarded as crucial to Saudi Arabia’s Vision 2030 reform plans, to ensure an ownership rate of 70 percent in the privately owned housing market by 2030.
In a panel entitled “Mortgages: Bolstering Industry Appetite,” Al-Hogail spoke of the unique position Saudi Arabia has in the housing market, highlighting the relevance of a database established by the Ministry of Housing to give a better and deeper understanding of the market. The diverse nature of the market presents its own challenges, he said.
“Every city has its own different set of challenges and we can’t generalize. With the establishment of the database, it provides the ministry with a better future outlook through more detailed information, obtained through various means — whether it were through the Electric Company, through the Ministry of Municipal and Rural Affairs, or through the General Authority for Statistics and their surveys.”
“Over 16 government agencies support the housing sector to achieve Saudi Vision objectives, to increase property ownership among Saudis to 70 percent by 2030,” he said.
An official report for the first quarter of 2019 revealed that the finance market reached SR5.6 billion last March. Some 12,800 citizens received loans, and 85 percent were subsidised.
Saudi Arabia last year announced plans to boost the size of the mortgage market to SR502 billion by 2020 as part of a comprehensive plan to provide housing finance to its citizens, facilitating a balanced and sustainable housing environment through the establishment and development programs.
In other deals, Bidaya Home Finance announced three initiatives to enhance the Saudi market. Its first initiative involved the sale of Bidaya’s mortgage portfolio to SRC, valued at SR500 million over a period of six months. SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview. “Our strategy is clearly to tap the market twice this year,” he said.
“We are really looking at probably issuing something between SR2 to 4 billion that we may be issuing in two tranches.”
He said SRC was looking at sukuk in the 10- to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said. He added that the company was assessing whether it could also issue bonds in currencies other than the Saudi riyal.
In March, SRC completed a SR750 million sukuk issue with multiple tenors, under a program that allows it to issue up to SR11 billion of local currency denominated Islamic bonds.