(Bloomberg) -- Wells Fargo is suddenly under tighter restrictions as one of its chief regulators ripped up parts of a recent settlement over bogus accounts, potentially hamstringing new business moves that need government approval.
The bank agreed to pay $185 million in September, settling a case in which the bank was accused of setting up as many as 2.1 million accounts that weren’t approved by customers. The Office of the Comptroller of the Currency has torn up part of that agreement and imposed heavier restrictions that will be in place until the bank satisfies all of the demands in the extensive order, including reimbursing customers and fixing the internal problems that contributed to the wrongdoing.
While Wells Fargo is subject to the terms of its settlement, it will face hurdles to making major purchases, such as buying large loan portfolios or other companies, a statement issued Friday by the OCC shows. The move, which revokes common protections granted to banks in settlements, limits Wells Fargo’s ability to make golden-parachute payments to departing employees and requires regulator approval before senior executives are hired.
Bryan Hubbard, an OCC spokesman, said he couldn’t comment further on what triggered the agency’s latest action. It’s unclear how long the company will be subjected to the unexpected new limits, because major enforcement orders often take many months or even years to satisfy.
REBUILDING TRUST
“We continue to cooperate with the OCC as well as all our regulators and will comply with these requirements,” said Jennifer Dunn, a Wells Fargo spokeswoman. “This will not inhibit our ability to execute our strategy, rebuild trust and serve our customers, and continue to operate the company for the benefit of all our stakeholders.”
Among the items on the San Francisco-based bank’s must-do list: bringing in an outside consultant to review sales practices, setting up a program for overseeing sales, coming up with better ways to field consumer complaints and establishing a plan for paying back harmed customers.
The Securities and Exchange Commission and the Department of Justice have also opened investigations into Wells Fargo. The bank’s chief executive officer, John Stumpf, retired after being blasted by lawmakers. The lender has also fired 5,300 workers and said it would eliminate sales goals linked by regulators to its cross-selling strategy.
STUMPF'S PAY
After a congressional hearing, Stumpf said he would forgo $41 million in unvested stock that had been granted for performance, as well as some of his salary. Wells Fargo has paid Stumpf more than $250 million since 2000, when the bank first began disclosing his compensation. That figure includes $23 million in salary, $44 million in cash bonuses, and $190 million from the vesting of stock and exercising of stock options.
Former community banking chief Carrie Tolstedt, the executive who was in charge of the unit implicated in the wrongdoing, will forgo about $19 million in unvested stock and agreed not to cash in outstanding options, the lender said at the end of September.
Earlier this year, the OCC released Wells Fargo from a similar -- though much more limited restrictions against its mortgage-servicing activity. Those limits, which lasted almost a year, resulted from the bank’s failure to meet requirements from an earlier settlement over foreclosure missteps.
