Pennsylvania’s state treasury is suspending its trading and investment activities with Wells Fargo & Co. in light of the bank’s fraudulent account activity in the state.
The treasury announced the decision Thursday after a recent meeting with bank representatives.
“As the state’s financial custodian, I am very concerned about the impact of Wells Fargo’s conduct on the state and our taxpayers,” Treasurer Timothy Reese said in a news release. “While treasury wasn’t impacted directly, the bank’s actions call into question its internal controls and culture, and until the bank fixes those problems, they will not be eligible for investment or trading work with treasury.”
Wells Fargo agreed to pay a nearly $185 million fine in September for allegedly opening more than 2 million unauthorized accounts to meet sales goals. Up to potentially near 80,000 of those accounts – including 2,600 that had incurred fees – were in Pennsylvania, the bank estimated.
The scandal prompted numerous changes at Wells Fargo, including the exit of its CEO, John Stumpf, in October and the election of a new one, Tim Sloan.
The executive changes were mentioned in a statement from the bank responding to the Pennsylvania treasurer’s move. The bank also noted changes in some of its practices, including the elimination of sales goals for retail bankers and increased oversight.
“We value our long-term relationship with the commonwealth of Pennsylvania and will do everything in our power to rebuild the state’s trust,” the bank said in its statement.
For the first nine months of 2016, the state treasury used Wells Fargo to make about $200 million in transactions, including through certificates of deposit and other investments, said Scott Sloat, treasury spokesman.
Wells Fargo noted in its statement that many of these activities were managed by Wells Fargo’s wholesale banking unit, which is separate from the bank’s retail functions.
The treasury also uses Wells Fargo as a concentration bank, meaning most of the department’s deposits and payments flow through it. The agency does not have immediate plans to sever that connection with the bank because of the cost and complexity of doing so, Sloat said.
The treasury’s decision follows months of nationwide scrutiny and penalties aimed at the San Franciso-based bank, which had the fifth-biggest market share in central Pennsylvania as of June.
The announcement Thursday fell on the same day as a regulatory filing from Wells Fargo that revealed the U.S. Securities and Exchange Commission was joining the long list of entities investigating the bank. Several U.S. attorneys, including ones in Maryland, New York and North Carolina, are also probing the bank’s activities in their states.