Overview
Wells Fargo is a U.S. based international banking and financial services holding company, headquartered
in San Francisco, California. It is ranked as one of the top banks in the world in assets ($1.9 trillion),
deposits ($1.3 trillion), and market capitalization ($264 billion as of 9/1/2017). For many years, Wells
Fargo has been a highly regarded financial institution. It took relatively few risks in the years leading up
to the 2008 Financial Crisis, which led to a company image of stability on Wall Street and in the financial
world.
The bank’s stable reputation was tarnished by the widespread fraud and subsequent coverage erupted in
- The Wells Fargo account fraud scandal is an ongoing controversy brought about by the creation of
millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their
consent. Various regulatory bodies, including the Consumer Financial Protection Bureau (CFPB), fined
the company a combined $185 million dollars as a result of the illegal activity, and the company faces
additional civil and criminal suits.
Wells Fargo clients began to notice the fraud after being charged unanticipated fees and receiving
unexpected credit or debit cards or lines of credit. Initial reports blamed individual Wells Fargo branch
workers and managers for the problem, as well as sales incentives associated with selling multiple
“solutions” or financial products. This blame was later shifted to a top-down pressure from higher-level
management to open as many accounts as possible through cross-selling. The controversy resulted in the
resignation of CEO John Stumpf.
Assignment
You are a high-profile enterprise risk management (ERM) consultant. You have been retained by a long-
term institutional investor to analyze the developments of the Wells Fargo account fraud scandal.
You were asked to review Wells Fargo’s 2016 and 2017 investor day reports, supplemented by quarterly
earnings, rating agency reports and equity analyst reports. You were asked to prepare a report to help
the investor understand the development of the scandal, how the ERM played its roles, actions taken by
the managements to address the issues, and the key risks outstanding for investing in Wells Fargo.
2016 Investor Day Report, Community Banking section
https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/presentations/2016/community-
banking-presentation.pdf (Links to an external site.)
Sample Solution
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