U.S. Senator Elizabeth Warren urged the Federal Reserve to remove the 12 Wells Fargo & Co. directors who were on the board when bank employees set up legions of fake customer accounts.
Congress empowered the Fed to remove board members if they violate the law or engage in unsafe business practices that cause banks with federal deposit insurance to suffer losses, Warren, a Massachusetts Democrat, wrote in a letter Monday to Fed Chair Janet Yellen.
“I urge you to exercise your legal authority to remove the holdover Wells Fargo board members,” Warren wrote. “The board did nothing to stop rampant misconduct” that led to “more than 5,000 bank employees creating more than two million fake accounts over four years,” between 2011 and 2015, Warren added.
Eric Kollig, a Fed spokesman, said, “We have received the letter and plan to respond.”
Wells Fargo has faced a barrage of criticism and calls for closer scrutiny since it was fined $185 million by regulators in September for possibly opening more than 2 million retail bank accounts without customer approval.
The scandal triggered public criticism and congressional hearings, prompting the San Francisco-based bank to name new leaders, claw back pay and find new ways to encourage sales.
In April, shareholders voted to narrowly re-elect all 15 board members after proxy advisers and some large investors had urged that the majority be voted off.
“Wells Fargo’s board and management team have taken many actions in response to its retail sales practices issues, including changes in senior leadership, executive accountability actions and numerous steps to ensure we make things right with any customer affected by unacceptable sales practices,” spokeswoman Jennifer Dunn said in an emailed statement. “That work continues and remains a core part of our efforts.”
Yellen said in September congressional testimony that the central bank had initiated “a broad-based review” of compliance regimes and governance at the largest banks.
“I think it is very important that senior management be held accountable,” she said at that time.
The Fed has the authority to remove bank board members, but only after presenting a case of how an individual’s actions have been unsafe for the organization as a whole. Using that process for nearly an entire board would represent a challenging legal undertaking by Fed staff.