- Bank warns it also faces regulatory scrutiny over car insurance
Wells Fargo said that the number of fake bank accounts set up by its staff could be significantly higher than previously thought and warned investors that it risks further regulatory investigations into a new scandal over car insurance.
The US bank has been trying to overcome a crisis since it was revealed that employees, under pressure to hit targets, set up as many as 2.1m accounts without customer authorisation over a period of about four years.
The bank has been reviewing the extent of the malpractice over an additional three-year period, as far back as 2009 — and on Friday Wells confirmed that this review “may lead to a significant increase in the identified number of potentially unauthorised accounts”. The disclosure came in a quarter-end regulatory filing which divulged new details of a series of lawsuits and investigations. Shares in Wells Fargo dropped 1.1 per cent on Friday, making it the biggest loser in the KBW index of 24 US banks.
The bank said it did not expect that any additional customer compensation payouts arising from the extended review into the malpractice would have a significant financial impact on the company. However, due to a number of other legal threats, the bank said its “reasonably possible” litigation charges could exceed reserves by $3.3bn — higher than the estimate of $2bn it provided three months ago.
Wells said that it faced possible investigations by several government agencies as well as lawsuits into a second scandal of mis-sold car insurance. The bank acknowledged last month that about 570,000 customers may have been improperly sold cover. Customers would receive about $80m in remediation.
Wells said in a filing on Friday that it may be subjected to “inquiries, investigations or examinations” from officials and may also become the subject of litigation. In a message to employees, Tim Sloan, chief executive, said: “We must continue to be transparent with all our stakeholders and go beyond what has been asked of us by our regulators by reviewing all of our operations — leaving no stone unturned.” He added: “Today’s regulatory filing reminds us of this.”