Wells Fargo executive Charles Scharf wants to stamp out any hint of scandal by redoing the company’s reporting lines, splitting the banking giant’s three divisions into five.
The Wall Street Journal reported Tuesday (Feb. 11) that the wholesale bank will be split into a commercial bank providing back-end services for companies, and separate investment bank that focuses on capital markets.
Also, the consumer bank will be split in half, with one half focused on branches and small businesses and the other on consumer lending, as it had been before 2017 when they were combined.
By splitting up the units, Scharf hopes to erase any whiff of scandal left after its fake account debacle, creating more oversight and having the heads of all departments report directly to him. The change is the first major structural shift since the hiring of Scharf last October.
An outsider to the company, Scharf has focused on appeasing regulators and repairing the bank’s reputation after the 2016 scandal where it was revealed that Wells Fargo branch employees had been opening millions of accounts without customer knowledge or consent.
In a statement, Scharf said he was confident that the company’s new focus on risk and control would be able to lead Wells Fargo down a path toward better accountability in the future.
The company’s decentralized nature, in which the power rested more with the heads of bank lines than it should have in the opinion of regulators, was a leading contributor to the scandal from 2016, regulators said. The structure has been described as “run it like you own it.” Lower-level employees, feeling pressure to hit sales targets, opened up fake accounts under what was described as an “aggressive” culture at the bank.
The new structure is reminiscent of JPMorgan Chase and, no surprise, Scharf is a former executive with that bank.