Embattled Wells Fargo gets overhaul from new CEO Charles Scharf

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Wells Fargo & Co. is overhauling its reporting lines, Chief Executive Charles Scharf’s first move to stamp out the corporate structure implicated in its fake-account scandal.

The bank said on Tuesday that it plans to split its three business units into five. What had been known as the wholesale bank will be split into a commercial bank that provides back-end services for companies, as well as a separate investment bank that focuses on capital markets.

The lender will also split its consumer bank into two units: one that focuses on branches and small businesses and another that focuses on consumer lending. The two units had been run separately prior to 2017.

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While the reorganization will result in more units, it is designed to provide more oversight, with the heads of each unit reporting directly to Scharf.

This is the first major structural change under Scharf, an outsider brought to run the bank in October. He has prioritized appeasing regulators and repairing the bank’s reputation, which was sullied after the company in 2016 revealed that branch employees had opened perhaps millions of accounts without customer consent.

REUTERS/Rick Wilking/File Photo

“I am confident that this organizational model and our strengthened risk and control foundation will bring greater focus and accountability to the company,” Scharf said in a statement.

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Regulators and Wells Fargo ’s board have said the company’s decentralized structure -- which gave considerable power to the leaders of the bank’s business lines -- was among the chief causes of the 2016 scandal. Inside the consumer bank, the run-it-like-you-own-it approach fostered an aggressive sales culture that pushed low-level employees to open fake accounts to hit their targets, the bank’s board concluded in a 2017 investigation.

The new structure echoes that of JPMorgan Chase & Co. , which emerged from the financial crisis as a leader among U.S. banks. Scharf, a former JPMorgan executive, once served as chief of staff to CEO James Dimon.

Scharf has brought in a number of outside executives, many of whom are former JPMorgan colleagues. They include Scott Powell, who joined as chief operating officer at the end of last year.

Mike Weinbach, formerly the head of JPMorgan’s mortgage business, will join Wells Fargo to run its new consumer lending unit. Mary Mack, who had overseen the unit that included lending and the community bank, will narrow her oversight to the community bank.

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Perry Pelos, who supervised the wholesale bank, will lead the commercial banking unit. Jon Weiss, who ran wealth and investment management, will manage the corporate and investment bank. The company will search for a new head of wealth and investment management.

Powell’s responsibilities also include oversight of sales practices across the organization. He has brought in another executive, Michael Cleary, to manage those efforts.

Wells Fargo will also create a new group to focus on strategy, digital platforms and innovation, encompassing some of the former responsibilities of Avid Modjtabai, an executive who announced her retirement last fall.