NEW YORK – Wells Fargo shares fell sharply on Wall Street on Monday, dropping more than 10 percent at one point during the trading day due to measures announced last week by the Federal Reserve.
The Fed decided to freeze Wells Fargo’s expansion after verifying “pervasive and persistent misconduct” by the fourth-largest US banking group beginning two years ago when bankers opened thousands of customer accounts without authorization.
Wells Fargo shares, which had closed at $64.07 on Friday, before the Fed measures to freeze the bank’s assets at the level where they stood at the end of last year until it can demonstrate improved internal controls, dropped 10.25 percent to $57.50 on Monday, although they closed slightly off the lows of the day.
In addition, negative reports from rating agencies and financial groups, such as JPMorgan and Morgan Stanley, which anticipate serious management and development problems at Wells Fargo, also weighed on share prices.
“We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again,” Fed Chair Janet L. Yellen said.
“The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers.”
Meanwhile, the bank said it will replace three current board members by April and a fourth board member by the end of the year.
Wells Fargo admitted that between 2009-2016 it was generalized practice by many of its bankers to open customer accounts without their consent, creating 3.5 million unauthorized new accounts and credit lines. As a result, it decided to fire 5,300 of its employees.
The scandal led to the October 2016 resignation of then-CEO John Stumpf, who was replaced by Tim Sloan.