In a move to assure regulators, lawmakers and clients, Wells Fargo & Co. have eliminated product sales goals for their consumer bankers after 2 million accounts were opened by their employees without the approval of their customers.
“We want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers,” said Chief Executive Officer John Stumpf in a statement on Tuesday.
The bank based in San Francisco will be facing a hearing on September 20 by the Senate Banking Committee after the enforcement case undertaken last week as regulators accused bank employees of opening deposit and credit card accounts to meet their sales goals without the approval of their clients. Stumpf is one of the company’s executives that have been invited to appear. The company agreed to pay fines worth $185 million, told their call center agents to temporarily suspend the cross-selling of financial products, and finally, on January 1, sales goals for retail bankers will be eliminated.
Wells Fargo’s spokeswoman, Mary Eshet, said that because of heavy call volumes during the U.S. Labor Day holiday it is another incentive to drop the strategy. Stopping cross-selling will help reduce the expected backlog, according to Eshet.
The allegations have hurt the financial company. The bank is the largest domestic lender in the U.S. and is billionaire Warren Buffet’s marquee investment, with his investment company Berkshire Hathaway Inc. being the largest shareholder of Wells Fargo.
Chief Financial Officer John Shrewsberry said that it would be able to deal with the scandal by adjusting to changes.
“We think we can adapt our business model, take sales goals out and still have a growth culture with people trying to deepen relationships with customers,” Shrewsberry said Tuesday at a conference. “I think we can make this pivot in a way that protects our business model.”
Employees have been pressured to do so to generate more revenue. “It was really more at the lower end of the performance scale, where people apparently were making bad choices to hang on to their job,” he said.
The scandal caused the company to terminate 10 percent of its managers among its 5,300 employees, with $2.6 million in fees refunded for 115,000 unauthorized accounts at about $25 per account. Of the total accounts opened without authorization, two-thirds were from the U.S. Southwest.
As a result, Wells Fargo went down to $47.40 by 2.4 percent in New York during early morning trading, the worst performance of the KBW Bank Index which saw a drop of 1.4 percent. The company has also seen its stocks go down by 13 percent this year as the KBW index went down 2.4 percent.
According to CLSA Ltd. analyst Mike Mayo, who is also a retired Wells Fargo executive who ran community banking, Carrie Tolstdet might experience a pay clawback from unvested stock awards if the bank reaches its financial targets worth $17.8 million, and retirement benefits worth $3.07 million.