Wells Fargo (NYSE:WFC) has had an eventful couple of years, and not in a good way. The bank's public perception has been rocked by three major scandals, including the infamous fake-accounts scandal, which has not only resulted in sub-par business performance, but has resulted in a string of penalties, fines, and consumer refunds as well.
Recently, Wells Fargo issued its 2017 annual report, which is entitled Rebuilding Trust. In the report, the annual letter from CEO Tim Sloan outlined the bank's efforts to repair itself. Here's what Sloan had to say about the bank's post-scandal efforts, the Federal Reserve's action against the bank, and what has been done thus far to correct the problem.
Image source: Wells Fargo.
A year of transformation
"This was a year of transformation at Wells Fargo," said Sloan, continuing:
Our top priority remains rebuilding the trust of our customers, team members, communities, regulators, and shareholders. We have made foundational changes to identify and fix problems so they do not happen again and achieved significant progress in our commitment to make things right for our customers and build a better bank.
The Federal Reserve penalty
One of the most significant developments in Wells Fargo's saga, especially from an investor's perspective, is the Federal Reserve's unprecedented penalty.
If you aren't familiar, the Fed essentially says that Wells Fargo isn't allowed to grow beyond its asset level at the end of 2017 until "substantial improvements" are made. Sloan writes:
We take very seriously the consent order we entered into with the Board of Governors of the Federal Reserve System in February 2018, and we will work diligently, yet swiftly, to meet the requirements.
Now, the Fed's language is rather vague. After all, the phrase "substantial improvements" is certainly open to interpretation. However, Sloan did give some color in regards to what happens next:
Under the terms of the consent order, the company will submit plans to the Federal Reserve within 60 days that detail our completed and planned actions to further enhance the board's governance oversight and the company's compliance and operational risk management program. After Federal Reserve approval, the company will engage independent third parties to conduct a review to be completed no later than Sept. 30, 2018.