“It takes a long time to turn a big ship.” No dispute there, but Wells Fargo’s fake-account scandal exploded in September 2016. There should have been some slight tacking.
However, Wells, whose stock has declined 15% since the 2016 shock (other banks’ stock prices have grown exponentially, with some doubled in value), still misses internal control issues, such as employee fraud in checking cashing and clearing. When it comes to self-assessment of risk, Wells, well, does not seem to get it.
Wells has employees meeting daily, virtually and in-person, to review risks and proposals for eliminating those risks. Still, Wells missed that fraud issue despite all the efforts. And the U.S. Comptroller of Currency has already indicated that the best way to fix big banks such as Wells may be to break up those big banks into smaller banks where problems emerge more quickly and can be remedied.
The problem at Wells is and always has been its culture. Culture change is a tough slog. It would not be unusual for a culture change to take five to ten years. However, if there is no visible difference in seven years, i.e., the ship is not tacking, then the problems lie with the leaders.
Issues such as incentives, disciplinary processes, terminations, turnover, promotions, demotions, and consistency in all of the previous areas are critical. Employee risk assessment groups cannot trump what employees see happening to them and their colleagues. Wells has a soft skills problem and it has been trying to solve it with a rote, mechanized process. Internal controls do not a culture make. Internal controls are late-catches for bad behaviors. Root out the bad behaviors and you may see some tacking.