Fines & Penalties Monitor: April 2017

Another month, another fine (and settlement) paid by our large bank group.  Two of the 18 largest institutions headquartered in the U.S. and E.U. incurred one fine and one settlement, bringing our 2017 total to $1.8 billion.

Wells Fargo & Co. increased its $110 million settlement, which was agreed upon last month, by an additional $32 million. The settlement is for a class-action lawsuit filed from the bank’s sales-scandal. According to a press release on the matter, the settlement now includes customers who had unauthorized accounts since May 2002, while the previous settlement included only customers in possession of those accounts since January 2009. Wells Fargo has stated that it expects the settlement to resolve 11 other related pending class-actions suits. According to SNL, Wells Fargo has, to date, refunded approximately $3.2 million to affected customers, covering the period from 2011 to 2016. Additionally, the bank is conducting its own voluntary review of accounts opened from 2009 to 2010.

Also in April, the Federal Reserve Board issued two enforcement actions against Deutsche Bank AG, resulting in $156.6 million in civil money penalties. The bank was ordered to pay $136.9 million for “unsafe and unsound practices in the foreign exchange markets” and $19.7 million for failing to comply with the Volcker Rule. The bank is also ordered to improve its oversight and controls related to the firm’s FX trading.

The month of April proved to be more notable for the actions of customers, rather than the actions of regulators. Wells Fargo is continuing to face repercussions for the sales scandal that broke in September of 2016. As well as an increase in payouts, the bank is facing reputational damage, shown in a large drop in accounts opened at the bank for the first quarter of 2017. Since January, the cities of Seattle, WA; Davis City, CA; Alameda, CA; and Santa Monica, CA, have either decided so scale back or entirely stop doing business with Wells Fargo. This scandal is also resulting in increased scrutiny of sales activities at other banks. At TD, for instance, there have been reports of aggressive sales practices and at Citizens, employees have been found falsifying appointment information. We may continue to see fallout from the sales scandal, not just at Wells Fargo, but at other financial institutions. Stay tuned!

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