Wells Fargo bank branch in New York. (Photo: Bloomberg) A Wells Fargo bank branch in New York. (Photo: Bloomberg)

Wells Fargo & Co.’s $1 billion settlement with regulators already has some saying that this marks the end of a troubled period for the scandal-plagued bank. That might be wishful thinking.

Part of the reason for the optimism is the size of the fine. Wells Fargo paid only $185 million for its fake-account scandal, which impacted as many as 3.5 million customers. The current fines are for abuses that relate to about 600,000 auto borrowers who were wrongly charged, as well as a much smaller group of customers at its mortgage division. The excessive fees were generally around $1,000. In total, Wells Fargo estimates that it overcharged all of its auto borrowers by about $80 million going back to 2012. You could argue that the bank shouldn’t have to pay a fine of more than 10 times the damage it did, which makes the $1 billion fee hefty indeed.

But the fake account scandal is an odd comparison because while a lot of customers were affected, very few were actually damaged. What’s more, part of the settlement over that scandal included the bank firing more than 5,000 employees. There were no mass disciplinary actions in response to the auto-lending abuses. Also, the amount of damages to fines might not even be the right comparison.

Wells Fargo, from 2012 to 2016, made $3.1 billion from auto lending. Its consumer bank in the same time made over $60 billion, and overall the bank netted $100 billion. You can make the case that at least some portion of those profits came from the fact that what Wells Fargo was spending on oversight wasn’t what it should have been. So fines to profits, rather than just what customers were overcharged, is likely the right comparison, and on that scale what Wells Fargo is paying isn’t that large. After all, the Consumer Financial Protection Bureau is fining Wells Fargo not just for the abusive practices (which is says have stopped), but also for the lack of oversight of its business.

And that’s the problem. It’s not clear that the oversight issue has been fixed. This past February, the Federal Reserve sanctioned Wells Fargo for not having the correct risk management controls in place. The CFPB isn’t convinced either. The settlement agreement includes a large action plan so the bank can prove to regulators that it has the right compliance system in place to make sure the bank’s incentive structures don’t spin it out of control in the future. That’s going to take money, and there has been little evidence that Wells Fargo has dramatically increased what it spends on its risk management, even in the wake of these many scandals.

There’s this, too: While Tim Sloan has repeatedly said Wells Fargo’s problems are in the past, it’s not clear management actually believes that. According to the bank’s most recent financial statement, it still expects future legal fees and fines could result in billions more in charges.

Investors have been looking for Well Fargo to cut costs.  In fact, the bank has pledged it will. That may please shareholders, but likely not regulators. And right now pleasing regulators may be the best way the bank can eventually please investors.

— For more Bloomberg View columns, visit http://www.bloomberg.com/view.


Stephen Gandel is a Bloomberg Gadfly columnist covering equity markets. He was previously a deputy digital editor for Fortune and an economics blogger at Time. He has also covered finance and the housing market.

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