Wells Fargo ushers in next stage of banking shame

The Wells Fargo fake-accounts scandal is ushering in the next stage of banking shame. The lender now needs regulatory approval to hire and fire executives and directors. The Office of the Comptroller of the Currency, which imposed this and other restrictions on Friday, is playing catch-up with the Securities and Exchange Commission and other agencies. But it has chosen the biggest target.
The OCC's belated decision to revoke its enforcement waiver came as a surprise. The agency had been a party to the original September action against Wells, imposing $35 million of the $185 fine to resolve allegations that Wells opened more than 2 million deposit and credit-card accounts, possibly without customer authorisation.
Banks involved in civil or criminal settlements need to get waivers from regulators to continue offering certain services. For years, watchdogs automatically granted such exemptions. That includes Labour Department waivers allowing miscreants to keep managing pension funds. Meanwhile, the Securities and Exchange Commission has routinely awarded passes allowing firms to continue selling securities on an expedited basis or engaging in private placements.
The waivers have become more controversial over the past year as banks became repeat offenders. SEC Commissioner Kara Stein has been especially critical. In 2015, she objected to the SEC's decision to grant waivers to JPMorgan and other banks that had pled guilty to manipulating foreign-exchange markets.
The Labour Department has also been under pressure from Congress over its exemptions. As a result, in 2015 it only granted a temporary waiver to Credit Suisse after it pleaded guilty to tax evasion - and even then only after holding a hearing on the case, a first.
And last month, the Labour Department rejected a waiver for RBS after it fessed up to manipulating foreign-exchange markets. It made little difference to the UK bank, which had already decided to quit the US pension business.
Och-Ziff, Deutsche Bank and other firms are waiting to hear answers on their waiver requests.
It's unclear how US President-elect Donald Trump views bank penalties. Congressman Jeb Hensarling, a Trump ally who chairs the House Financial Services Committee, has proposed tougher punishment for wrongdoing. Targeting Wells Fargo, the nation's second-largest bank by market value, is the strongest signal yet that watchdogs can always find new ways to crack down on recidivist firms.
The Office of the Comptroller of the Currency on November 18 revoked enforcement relief for Wells Fargo that it had automatically granted after the bank settled its fake-accounts scandal. In September the San Francisco-based lender agreed to pay a $185 million regulatory fine for opening more than 2 million deposit and credit-card account, possibly without customer authorisation.
Wells Fargo now has to get approval from the OCC before making certain business decisions, changing directors and senior executive officers and giving board directors and senior executives golden parachute severance payments if they leave the bank.
In October, former Wells Fargo chief executive John Stumpf stepped down from his position because of the scandal. He also forfeited $41 million in unvested equity awards.