Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Ongoing internal investigation and disciplinary actions at Wells Fargo

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October 2016 photo at Wells Fargo’s museum in San Diego by James Ulvog.

The Wells Fargo fake account fiasco doesn’t seem to be generating any more major headlines. Still some notable news if you go several pages into the second section of the WSJ. Also, the WF living trust plan got a failing grade.

2/21/17 – MarketWatch – Wells Fargo fires 4 managers as part of investigation into sales scandal – Titles of fired senior managers shows decent level of seriousness in accountability:

  • Chief risk officer for the community banking division
  • Arizona regional president
  • Los Angeles regional president
  • Retail banking strategy and initiatives manager

2/21/17 – Emily Glazer at Wall Street Journal – Wells Fargo Fires Four Executives Following Probe of Sales-Practice Scandal – The four execs will not get any bonus for 2016 and will forfeit all unvested stock and all vested options.

3/1/17 – Emily Glazer and Austen Hufford at Wall Street Journal – Wells Fargo: Top Executives Won’t Get Cash Bonus for 2016 – The CFO and new CEO are amongst the eight senior execs who will lose out on their 2016 bonus and have some stock options taken away.

Perhaps more important, buried in the article is an announcement that Wells thinks there may be more affected customers than previously announced.

3/9/17 – Emily Glazer at Wall Street Journal – Wells Fargo Shakes Up Consumer Banking Unit, Demotes Executives – Two executives had their responsibilities cut back. This follows firing three managers in the retail banking division earlier in the week.

Bank will continue interviews of staff as part of ongoing investigation efforts.

In some older news on unrelated topic…

12/21/16 print edition – Emily Glazer & Ryan Tracy at Wall Street Journal – Wells Fargo Scrambles to Deal With New Crisis – Weeks Fargo was assigned a failing grade on its plan to survive a financial failure. Their previous 2014 plan passed but their 2015 plan was failed by the regulators earlier in 2016.

The article briefly addresses the different approach Wells is taking in contrast to the other big banks. I obviously don’t understand.

Let me try to explain what my little brain thinks is the difference. The Wells approach would have some subsidiaries either put into bankruptcy or allowed to run on their own. The alternative approach, as I get it, would be to put the holding company into bankruptcy. The later approach is used by other big banks. Not sure I see the difference. From the few sentences in the article, I’ll make a wild guess the different approaches are to save the holding company or ditch it as the first step.

Perhaps the reason I don’t understand is the article tried to explain the issue in a few paragraphs. Article said that after the Wells living trust plan was failed by the Fed and FDIC earlier in 2016 the bank spent “millions” on consultants to rework the plan. Consider that thousands of hours of work ($1M / $200/hr assumed average rate = 5,000 consultant-hours per million bucks spent) by people who have a deep understanding of banking can’t be summarized in a few dozen words.

Some other things I learned from the article… this is the first time a big bank got a fail grade on their resubmitted plan.

Consequence of that failing grade are Wells may not start any new international entities and may not make any acquisitions. If their resubmission, which is due by this month (March 2017) doesn’t get a passing score, the feds can put a cap on growth. If an acceptable plan isn’t received in another two years, the feds can force the bank to start selling off assets in order to shrink the bank’s balance sheet.

Written by Jim Ulvog

March 15, 2017, 8:13 am at 8:13 am

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