The scandal surrounding Wells Fargo has resulted in the bank ousting its chairman and chief executive as John Stumpf has decided to leave the bank with immediate effect.
Wells Fargo has been plagued by criticism and scandals since the financial crisis and although this may not have come as a surprise for many, relatively few banking chiefs have stepped down under outside pressure, despite the industry’s woes.
But a far as Wells Fargo goes, its breaches were unusually blatant which contributed to the public outcry. There were no complicated or fraudulent trades involved, nor any complex mortgage trickery. The bank’s misdemeanors were basically simple. Under intense pressure to meet aggressive sales targets, employees created as many as 2 million fraudulent accounts using the names and often the money of the bank’s real customers.
Stumpf, who made cross-selling a main part of Wells Fargo’s strategy, was berated over the episode, and finally caved into pressure from Washington five weeks after regulators disclosed their findings.
In a separation of the top jobs, Tim Sloan, a veteran of the bank and its president and chief operating officer, will become chief executive while Stephen Sanger, the board’s lead director, will become chairman.
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In an interview on Wednesday, Mr Sloan said his predecessor had decided to go “without any pressure from the board. It’s an incredibly selfless act when you think about it.”
“He felt that he’d become a distraction. There was so much focus on John. That’s not what Wells is about. What Wells is about is serving its customers.”
With a background in the commercial and wholesale side of the business, Sloan has not been dragged into the scandal, which took place at its community banking division.
According to Wells Fargo, Strumpf will not receive a severance package but will leave with an estimated $28 million of retirement benefits and around $110 million in stock. Strumpf is said to have commented that he will not be selling the shares he owns until the investigation into the fake accounts is completed.
Having already forfeited more than $40 million in pay, Strumpf said he was “deeply sorry” for the bank’s conduct but was “optimistic” about the bank’s future.
He commented: “While I have been deeply committed and focused on managing the company through this period, I have decided it is best for the company that I step aside. I know no better individual to lead this company forward than Tim Sloan.”