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.


Emirates Airline half-year profit slides 86% on oil hike

Updated 15 November 2018
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Emirates Airline half-year profit slides 86% on oil hike

DUBAI: Emirates Airline on Thursday posted an 86 percent drop in half-year profits as the Middle East's leading carrier was hit by a hike in oil prices and currency devaluations.
The Dubai-based airline in a statement its net profit in the six months to September 30 was also impacted by other challenges and expected tough months ahead.
Emirates said it recorded a profit of just $62 million in the first half of the 2018-2019 fiscal year compared with $452 million in the same period last year.
"The high fuel cost as well as currency devaluations in markets like India, Brazil, Angola and Iran, wiped approximately 4.6 billion dirhams ($1.25 billion) from our profits," said Sheikh Ahmed bin Saeed Al-Maktoum, chairman and chief executive of Emirates Group.
Emirates, one of the world's biggest airlines, said fuel costs rose by 42 percent compared with the same period last year.
The company, which flies to more than 150 destinations, said the cost of fuel amounted to a third of its expenses.
Emirates is the world's largest operator of Airbus A380s with more than 100 of the superjumbos in its fleet.
"The next six months will be tough, but the Emirates Group's foundations remain strong," Sheikh Ahmed said in a statement.
In the six months to September 30, the airline carried 30.1 million passengers, a rise of three percent on the last fiscal year, the company said.
Emirates' revenues were 10 percent higher than the previous year at $13.3 billion.
"We are proactively managing the myriad challenges faced by the airline and travel industry, including the relentless downward pressure on yields and uncertain economic and political realities in our region and in other parts of the world," said Sheikh Ahmed.
Profit for the Emirates Group, which also includes Dnata, a leading air services provider, was also down by 53 percent to $296 million.