Newly instated Wells Fargo CEO Charles Scharf on Tuesday blamed the company's alleged consumer abuses, including a fake-account scandal, on a "broken" culture and acknowledged the bank needs to do more to address its shortcomings.
While testifying before the House Financial Services Committee, Scharf, who took over the helm of the troubled bank in October, insisted he was "confident" that Wells Fargo could move the company in a "significantly improved direction."
"Simply said, we had a flawed business model in how the company was managed," Scharf said. "Our structure was problematic, and the company’s leadership failed its stakeholders. Our culture was broken, and we did not have the appropriate controls in place across the company."
Scharf said he was making "substantial changes to our leadership," one day after the bank's chair Betsy Duke resigned from its board of directors. Board member James Quigley also resigned.
Last week, the chairwoman of the committee, Rep. Maxine Waters, D-Calif., called on the two directors to resign saying they "failed their responsibilities" to overhaul the scandal-ridden bank. Her comments followed the release of a report documenting how Duke, Quigley and senior Wells Fargo leadership allegedly mismanaged its obligations to federal regulators, three-and-a-half years after it possibly created millions of fake customer accounts.
The changes include bringing in three new leaders and adding two more "soon" from outside Wells Fargo to join its operating committee. About 75 percent of the group will be new to the company since the beginning of 2018, he said in his prepared remarks.
"We reorganized the structure of our businesses to ensure we have clear responsibility and accountability across the company," he said.
Wells Fargo also overhauled its evaluation and compensation practices, and expanded its compliance team by more than 3,300 employees since the end of 2017.
"I want to give you my personal assurance that we will do the work necessary to put Wells Fargo on sound footing with our customers, employees, regulators, shareholders, and the communities we serve," he said. "What we have done to date is not enough, and we will continue to drive progress."