REUTERS: Wells Fargo & Co said on Thursday Tim Sloan will resign immediately as its chief executive, becoming the second CEO to leave the bank in the fallout of a wide-ranging sales practices scandal.
The board said in a statement it concluded it was best to seek an outside candidate. The bank's general counsel, C. Allen Parker, will serve as interim chief executive.
"The board has concluded that seeking someone from the outside is the most effective way to complete the transformation at Wells Fargo," Board Chair Betsy Duke said in a statement.
As recently as a week ago, the board reiterated its unanimous support for Sloan.
Sloan, a 31-year veteran at the bank, took the helm of the company in October 2016 after John Stumpf resigned following revelations that the bank opened potentially millions of unauthorized consumer accounts. Prior to serving as CEO, Sloan served as chief operating officer and head of the wholesale bank.
Under Sloan, Wells Fargo focused on changing the bank's culture and moving past its scandals. In the past two years the bank got rid of the lofty sales incentives that led to the fake accounts and repaid millions to customers who were improperly charged fees. But reputational issues continued to hang over the bank as it racked up billions in settlements and fines.
In March 2018 the U.S. Federal Reserve imposed an unprecedented asset cap on Wells Fargo, barring it from growing its balance sheet until it improved risk management controls. The bank has said it expects to operate under the cap for the remainder of the year.
In a statement earlier this month, Fed Chair Jerome Powell said the bank still has a lot of work to do to prove it has changed. "What happened at Wells Fargo really was a remarkably widespread series of breakdowns really in their risk management apparatus," he said.
The Fed and the Office of the Comptroller of the Currency, the bank's primary regulator, both declined to comment on Sloan's departure.
Sloan had become a target for regulators and politicians who repeatedly called for his removal. U.S. Senators Elizabeth Warren and Sherrod Brown recently called for his resignation. Earlier this month, he was grilled by the House Financial Services Committee.
Unlike in 2016, the board opted to change the narrative by going outside the company for a new CEO. "The best thing he (Sloan) could do for the company was to retire. In the long run, it is the right move," RBC Capital Markets analyst Gerard Cassidy said.
Wells Fargo has long prided itself on its homegrown culture. But the bank's insularity proved burdensome in recovering from the scandal.
Critics had accused Sloan, who was part of the management team while the wrongdoing was happening, of being too entrenched in Wells Fargo's culture to change it.
Parker, the interim head, joined Wells Fargo from an outside law firm as general counsel in March 2017 to help turn around the bank. At the time he was the only one of 11 top executives who had not been at the bank during the scandal.
Parker will receive an annual base salary of US$2 million, according to filings. Sloan's departure came two weeks before the fourth-largest U.S. bank by assets was due to report first-quarter results and a month before its annual shareholder meeting. In 2016, the bank agreed to pay US$185 million to the U.S. Consumer Financial Protection Bureau and other agencies, the largest fine of its kind, to settle a sales practice scandal in its consumer retail bank. Two weeks ago, the bank said Sloan received a 5 percent pay raise for 2018, with base salary of US$2.4 million, US$14 million in stock awards and a US$2 million bonus based on the bank's financial performance.
(Reporting by Imani Moise and Pete Schroeder; additional reporting by David Henry; Editing by Neal Templin and Dan Grebler)