A national bank regulator blamed itself for failing to catch questionable sales practices at Wells Fargo & Co. for years before a national scandal last fall.
The Office of the Comptroller of the Currency published the results of an internal review that found OCC supervisors missed or failed to address warning signs about the bank's sales incentive program.
Continue Reading Below
The bank examiners knew of reports of sales integrity violations as far back as 2010, but "did not take timely and effective supervisory actions, " the report said.
The bank paid a $185 million fine in September 2016 for what authorities called widespread illegal sales practices that led to the opening of as many as two million phony customer accounts. Many employees were fired or quit as a result of a cutthroat sales culture, and customers were stuck with credit cards or other products they didn't seek.
Wells Fargo still faces federal and state investigations. The bank has said it is cooperating.
The OCC report amounts to a detailed critique of alleged failures at the agency, the primary regulator of Wells Fargo. It found that supervisors were aware of complaints about the sales program, including a meeting with a senior Wells Fargo executive in January 2010 at which they inquired about 700 whistleblower complaints "related to the gaming of incentive plans."
Examiners in 2010 also pointed out that they hadn't seen the bank assess risks associated with the sales practices or create a good system for monitoring complaints about them, the report said.
Despite raising these questions and concerns, the supervisors repeatedly didn't follow up on them or identify root causes, the report said.
The OCC sent the bank five "matter requiring attention" warnings on "various sales practice concerns", the report said, but they were addressed to now-former Chairman and CEO John Stumpf and not to the board.
The report also said Wells Fargo's board received information as early as 2005 indicating there were a significant number of internal complaints and employee firings related to "sales integrity violations."
The bank's board is facing a vote of confidence next week at a potentially contentious shareholder meeting.
The report recommended the OCC take several steps, including creating a better process for reviewing whistleblower complaints.
Comptroller Thomas Curry asked the agency's ombudsman office to prepare the internal review. In an email Wednesday accompanying the release of the report, an OCC spokesman said Mr. Curry has "stated unequivocally that the OCC can and must do better, including identify[ing] and acting on issues like these sooner. The report is consistent with that statement."
The OCC spokesman said the agency is "in the process of implementing actions" related to the report's recommendations.
Mr. Curry asked a group of bank supervisors, including some from other countries, to critique the agency's large bank supervision program. Acting on their recommendations, the OCC in 2014 began to change the way it organizes its examiner workforce. It has hired hundreds of additional large bank supervisors, and aggressively audited banks' lending standards, anti-money-laundering programs, and mortgage foreclosure practices, among other areas.
But the internal report on Wells Fargo renews an old criticism that agency has faced will for years: Its examiners are too cozy with the banks they regulate.
In July 2011, Mr. Stumpf spoke to roughly 2,000 OCC staffers and was introduced by an OCC official as "someone who understands the role of bank supervision and the importance of operating as a team to achieving a broader vision," according to a recording of the remarks previously reported by The Wall Street Journal.
Mr. Stumpf encouraged the crowd to view "banks as partners, not as your problems".
The senior OCC examiner for Wells Fargo was reassigned to a different role recently, people familiar with the matter have said. The agency hasn't said why the change was made.
Emily Glazer and Rachel Witkowski contributed to this article.
Write to Ryan Tracy at email@example.com
(END) Dow Jones Newswires
April 19, 2017 17:26 ET (21:26 GMT)