SACRAMENTO, Calif. – California’s treasurer said Wednesday that he’s suspending some of the state’s most profitable lines of business with Wells Fargo amid allegations bank employees opened millions of accounts without customers’ permission.
The announcement by the nation’s largest issuer of municipal debt reflects the growing political pressure on the banking giant since it agreed to pay $185 million to settle the allegations. While the sanctions apply to only a portion of California’s business with Wells Fargo, the impact could grow if more states follow suit, as state Treasurer John Chiang urged them to do.
“I have a responsibility to take action aimed at helping Wells Fargo and all financial institutions to understand that integrity and trust matter,” Chiang said at a news conference two miles from the bank’s San Francisco headquarters. Chiang, a Democrat, is in a crowded field of Democrats running for governor in 2018.
Chiang said he wants to send a message that the bank’s behaviour was “a legal and ethical outrage.”
For the next year, Chiang said he will stop using Wells Fargo as the managing underwriter on negotiated bond sales. In 2015, the bank managed approximately $700 million of bond sales of the type that will be suspended.
The treasurer said his office, which oversees a $75 billion investment fund, will not buy additional Wells Fargo stock and won’t use the bank as a broker for investment purchases. The sanctions will last 12 months.
Chiang said chairman and CEO John Stumpf should resign, and the board should separate the chairman and chief executive positions.
Wells Fargo understands the concerns raised over its sales practices and is working to rebuild trust with customers, spokeswoman Jennifer Dunn said.
“Our highly experienced and proven government banking, securities and treasury management teams stand ready to continue delivering outstanding service to the state,” Dunn said.
The company said Tuesday that Stumpf and the executive who ran the bank’s retail banking division will forfeit tens of millions of dollars in pay.
Federal and local authorities said Wells Fargo & Co. employees trying to meet tough sales targets opened bank and credit card accounts, moved money between those accounts and even created fake email addresses to sign customers up for online banking — all without customer authorization. Debit cards were issued and activated, as well as PINs created, without customers’ knowledge.
The bank says it has refunded to customers $2.6 million in fees charged for products that were sold without authorization and fired 5,300 employees.