News Banks large and small brace for shockwave of Wells Fargo scandal Listen Hun
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News Banks large and small brace for shockwave of Wells Fargo scandalListen
Huntington Bancshares Inc. CEO Steve Steinour addressed the elephant in the room when, unprompted, he told investors during a third-quarter earnings call that Huntington Bank was reviewing sales incentives and the ways its bankers interact with customers. It's a topic that doesn't normally come up in investor calls, where conversation mostly focuses on bank performance and market outlooks. But this past quarter was a atypical from others, as the banking industry was marred by a massive scandal uncovered at Wells Fargo in September involving some 2 million bogus customer accounts opened to inflate sales figures. The result was thousands of fired staff, fines and a serious blemish on the San Francisco-based bank's reputation in the market. Steinour, like many of his fellow executives at other banks, told analysts he doesn't anticipate Huntington's review turning up anything questionable that would result in material changes to their procedures. Yet, "I think we'll be a little more proactive in terms of how we measure performance," he said. That Huntington, a reputable bank that has drawn its share of awards and recognitions for consumer service, is proactively addressing such issues underscores the aftershock that event is having on the industry. Like Huntington, one of the largest banks in Northeast Ohio, other banks are being proactive in facing the questions and concerns coming from investors, customers and their boards of directors for fear of making headlines the way Wells Fargo did, while similarly bracing for the coming regulatory impact. And that goes for smaller banks, too, not just the big Wall Street companies. "All of this, it's going to trickle down to us," said Thomas Caldwell, president and CEO of Middlefield Bank. "It always does." Larry Magnesen, a spokesman for Fifth Third Bank, said the company hasn't "made any changes in policies or compensation. However, we recognize that trust in the banking industry may have been called into question because of the recent development." A bank is still a business, and sales and performance incentives should be expected. The average incentive target for an individual banker at Fifth Third is 5% to 7% of their base salary, and 11% for a branch manager. Yet, acknowledging that general sense of distrust perpetuated by the Wells Fargo scandal, Magnesen said the bank will now mail "welcome" letters to customers following the opening of any new checking, savings or credit card account that, among other things, directs those people to contact them if they think the account wasn't actually set up by them, or even if it just wasn't what they expected. "We want to make sure every customer gets exactly what they think they are getting and are entirely comfortable," he said. These past several weeks, banks have been reinforcing a message of trustworthiness while adding the caveat that reviews are underway. PNC Bank, Cleveland's second-largest bank, is no different. "We believe we've been successful in building our business without encouraging the widespread, unauthorized account opening activity that appears to have occurred at Wells Fargo," said spokesman Frederick Solomon. "Of course, we are taking a fresh look at our sales and incentive programs following the actions taken against Wells Fargo." The Office of the Comptroller of the Currency has been contacting large and midsize banks requesting information on the same practices now creeping up to the front of the market's mind. In October, the OCC announced it was embarking on an investigation — featuring on-site reviews — into questionable sales tactics at banks with $10 billion and more in assets. That's being coordinated, to no short extent, with the Federal Reserve, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau as a result of the Wells Fargo incident. The greater concern is whether those efforts could translate to more compliance and regulatory burdens for banks in the smaller end of that spectrum, said James Thurston, a spokesman with the Ohio Bankers League trade association. "Whenever you have a big issue like this develop in the industry, there is always a fear there will be some regulatory overreach that results from it," he said. "After the financial crisis, we probably swung the pendulum too far and ended up with (the Dodd-Frank Act)." Maintaining compliance is costly. And while banks at $10 billion certainly aren't small, those between $10 billion to $50 billion are less likely to have the same staffs of dedicated, year-long examiners that their larger counterparts might have. So while these reviews will likely turn up few negative findings, smaller and midsize banks — including those not being immediately targeted by the OCC now — are leery of how this will affect them in the long run, considering the potential to add to the regulatory burden that's been squeezing bank margins for years. That margin squeeze can be suffocating for community banks. "Do we expect an impact? I think you don't have to look any further than (the Dodd-Frank Act)," said Caldwell of Middlefield Bank, which has just under $1 billion in assets. "There is no doubt that the biggest concern we have is what new legislation or regulatory actions are going to be taken to prevent this type of action in the future." Caldwell, a state delegate with the Community Bankers Association of Ohio, said smaller banks are more concerned about the regulatory impact than reviewing internal practices or customer distrust. "The bigger banks create these problems," he said. "But water runs downhill. And eventually, it's going to hit us, and we're going to have to deal with it. That's why you see consolidation within the industry. These smaller banks, at some point in time, are just saying we can't afford to do business as usual." Caldwell also lamented what often seems like lopsided treatment of large, Wall Street banks following revelations of scandal. "If my bank would've done something like this, I can almost guarantee I would be banned from banking, and probably made to pay a civil money penalty, and my board members probably would too," he said. Wells Fargo, a company with nearly $1.8 trillion in assets, was fined $185 million in September for the scandal. CEO John Stumpf, meanwhile, stepped down from his role in October, but he had the potential to still take home over $100 million if he was fired by their board of directors. That all has left many onlookers with a sour taste in their mouths. "As far as I'm concerned," Caldwell said, "these regulators or Congress need to start setting an example with these large banks and make the folks in charge of running these banks personally liable for what happens because we try to do things the right way, but disproportionately suffer the fallout." Twitter: @JeremyNobile ~~~~~~~~ By JEREMY NOBILE
Reference:
NOBILE, J. (2016). Banks large and small brace for shockwave of Wells Fargo scandal. Crain's Cleveland Business, 37(45), 0001.
After reading the article answer the following questions:
1. Summarize the article and align it with the author’s main point. 2. How does this article contribute to contemporary thinking about business ethics? 3. How can you apply information in this article to your field? 4. How did this article fit your ethical view? News Banks large and small brace for shockwave of Wells Fargo scandal
Listen
Huntington Bancshares Inc. CEO Steve Steinour addressed the elephant in the room when, unprompted, he told investors during a third-quarter earnings call that Huntington Bank was reviewing sales incentives and the ways its bankers interact with customers. It's a topic that doesn't normally come up in investor calls, where conversation mostly focuses on bank performance and market outlooks. But this past quarter was a atypical from others, as the banking industry was marred by a massive scandal uncovered at Wells Fargo in September involving some 2 million bogus customer accounts opened to inflate sales figures. The result was thousands of fired staff, fines and a serious blemish on the San Francisco-based bank's reputation in the market. Steinour, like many of his fellow executives at other banks, told analysts he doesn't anticipate Huntington's review turning up anything questionable that would result in material changes to their procedures. Yet, "I think we'll be a little more proactive in terms of how we measure performance," he said. That Huntington, a reputable bank that has drawn its share of awards and recognitions for consumer service, is proactively addressing such issues underscores the aftershock that event is having on the industry. Like Huntington, one of the largest banks in Northeast Ohio, other banks are being proactive in facing the questions and concerns coming from investors, customers and their boards of directors for fear of making headlines the way Wells Fargo did, while similarly bracing for the coming regulatory impact. And that goes for smaller banks, too, not just the big Wall Street companies. "All of this, it's going to trickle down to us," said Thomas Caldwell, president and CEO of Middlefield Bank. "It always does." Larry Magnesen, a spokesman for Fifth Third Bank, said the company hasn't "made any changes in policies or compensation. However, we recognize that trust in the banking industry may have been called into question because of the recent development." A bank is still a business, and sales and performance incentives should be expected. The average incentive target for an individual banker at Fifth Third is 5% to 7% of their base salary, and 11% for a branch manager. Yet, acknowledging that general sense of distrust perpetuated by the Wells Fargo scandal, Magnesen said the bank will now mail "welcome" letters to customers following the opening of any new checking, savings or credit card account that, among other things, directs those people to contact them if they think the account wasn't actually set up by them, or even if it just wasn't what they expected. "We want to make sure every customer gets exactly what they think they are getting and are entirely comfortable," he said. These past several weeks, banks have been reinforcing a message of trustworthiness while adding the caveat that reviews are underway. PNC Bank, Cleveland's second-largest bank, is no different. "We believe we've been successful in building our business without encouraging the widespread, unauthorized account opening activity that appears to have occurred at Wells Fargo," said spokesman Frederick Solomon. "Of course, we are taking a fresh look at our sales and incentive programs following the actions taken against Wells Fargo." The Office of the Comptroller of the Currency has been contacting large and midsize banks requesting information on the same practices now creeping up to the front of the market's mind. In October, the OCC announced it was embarking on an investigation — featuring on-site reviews — into questionable sales tactics at banks with $10 billion and more in assets. That's being coordinated, to no short extent, with the Federal Reserve, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau as a result of the Wells Fargo incident. The greater concern is whether those efforts could translate to more compliance and regulatory burdens for banks in the smaller end of that spectrum, said James Thurston, a spokesman with the Ohio Bankers League trade association. "Whenever you have a big issue like this develop in the industry, there is always a fear there will be some regulatory overreach that results from it," he said. "After the financial crisis, we probably swung the pendulum too far and ended up with (the Dodd-Frank Act)." Maintaining compliance is costly. And while banks at $10 billion certainly aren't small, those between $10 billion to $50 billion are less likely to have the same staffs of dedicated, year-long examiners that their larger counterparts might have. So while these reviews will likely turn up few negative findings, smaller and midsize banks — including those not being immediately targeted by the OCC now — are leery of how this will affect them in the long run, considering the potential to add to the regulatory burden that's been squeezing bank margins for years. That margin squeeze can be suffocating for community banks. "Do we expect an impact? I think you don't have to look any further than (the Dodd-Frank Act)," said Caldwell of Middlefield Bank, which has just under $1 billion in assets. "There is no doubt that the biggest concern we have is what new legislation or regulatory actions are going to be taken to prevent this type of action in the future." Caldwell, a state delegate with the Community Bankers Association of Ohio, said smaller banks are more concerned about the regulatory impact than reviewing internal practices or customer distrust. "The bigger banks create these problems," he said. "But water runs downhill. And eventually, it's going to hit us, and we're going to have to deal with it. That's why you see consolidation within the industry. These smaller banks, at some point in time, are just saying we can't afford to do business as usual." Caldwell also lamented what often seems like lopsided treatment of large, Wall Street banks following revelations of scandal. "If my bank would've done something like this, I can almost guarantee I would be banned from banking, and probably made to pay a civil money penalty, and my board members probably would too," he said. Wells Fargo, a company with nearly $1.8 trillion in assets, was fined $185 million in September for the scandal. CEO John Stumpf, meanwhile, stepped down from his role in October, but he had the potential to still take home over $100 million if he was fired by their board of directors. That all has left many onlookers with a sour taste in their mouths. "As far as I'm concerned," Caldwell said, "these regulators or Congress need to start setting an example with these large banks and make the folks in charge of running these banks personally liable for what happens because we try to do things the right way, but disproportionately suffer the fallout." Twitter: @JeremyNobile ~~~~~~~~ By JEREMY NOBILE
Reference:
NOBILE, J. (2016). Banks large and small brace for shockwave of Wells Fargo scandal. Crain's Cleveland Business, 37(45), 0001.
After reading the article answer the following questions:
1. Summarize the article and align it with the author’s main point. 2. How does this article contribute to contemporary thinking about business ethics? 3. How can you apply information in this article to your field? 4. How did this article fit your ethical view? News Banks large and small brace for shockwave of Wells Fargo scandal
Listen
Huntington Bancshares Inc. CEO Steve Steinour addressed the elephant in the room when, unprompted, he told investors during a third-quarter earnings call that Huntington Bank was reviewing sales incentives and the ways its bankers interact with customers. It's a topic that doesn't normally come up in investor calls, where conversation mostly focuses on bank performance and market outlooks. But this past quarter was a atypical from others, as the banking industry was marred by a massive scandal uncovered at Wells Fargo in September involving some 2 million bogus customer accounts opened to inflate sales figures. The result was thousands of fired staff, fines and a serious blemish on the San Francisco-based bank's reputation in the market. Steinour, like many of his fellow executives at other banks, told analysts he doesn't anticipate Huntington's review turning up anything questionable that would result in material changes to their procedures. Yet, "I think we'll be a little more proactive in terms of how we measure performance," he said. That Huntington, a reputable bank that has drawn its share of awards and recognitions for consumer service, is proactively addressing such issues underscores the aftershock that event is having on the industry. Like Huntington, one of the largest banks in Northeast Ohio, other banks are being proactive in facing the questions and concerns coming from investors, customers and their boards of directors for fear of making headlines the way Wells Fargo did, while similarly bracing for the coming regulatory impact. And that goes for smaller banks, too, not just the big Wall Street companies. "All of this, it's going to trickle down to us," said Thomas Caldwell, president and CEO of Middlefield Bank. "It always does." Larry Magnesen, a spokesman for Fifth Third Bank, said the company hasn't "made any changes in policies or compensation. However, we recognize that trust in the banking industry may have been called into question because of the recent development." A bank is still a business, and sales and performance incentives should be expected. The average incentive target for an individual banker at Fifth Third is 5% to 7% of their base salary, and 11% for a branch manager. Yet, acknowledging that general sense of distrust perpetuated by the Wells Fargo scandal, Magnesen said the bank will now mail "welcome" letters to customers following the opening of any new checking, savings or credit card account that, among other things, directs those people to contact them if they think the account wasn't actually set up by them, or even if it just wasn't what they expected. "We want to make sure every customer gets exactly what they think they are getting and are entirely comfortable," he said. These past several weeks, banks have been reinforcing a message of trustworthiness while adding the caveat that reviews are underway. PNC Bank, Cleveland's second-largest bank, is no different. "We believe we've been successful in building our business without encouraging the widespread, unauthorized account opening activity that appears to have occurred at Wells Fargo," said spokesman Frederick Solomon. "Of course, we are taking a fresh look at our sales and incentive programs following the actions taken against Wells Fargo." The Office of the Comptroller of the Currency has been contacting large and midsize banks requesting information on the same practices now creeping up to the front of the market's mind. In October, the OCC announced it was embarking on an investigation — featuring on-site reviews — into questionable sales tactics at banks with $10 billion and more in assets. That's being coordinated, to no short extent, with the Federal Reserve, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau as a result of the Wells Fargo incident. The greater concern is whether those efforts could translate to more compliance and regulatory burdens for banks in the smaller end of that spectrum, said James Thurston, a spokesman with the Ohio Bankers League trade association. "Whenever you have a big issue like this develop in the industry, there is always a fear there will be some regulatory overreach that results from it," he said. "After the financial crisis, we probably swung the pendulum too far and ended up with (the Dodd-Frank Act)." Maintaining compliance is costly. And while banks at $10 billion certainly aren't small, those between $10 billion to $50 billion are less likely to have the same staffs of dedicated, year-long examiners that their larger counterparts might have. So while these reviews will likely turn up few negative findings, smaller and midsize banks — including those not being immediately targeted by the OCC now — are leery of how this will affect them in the long run, considering the potential to add to the regulatory burden that's been squeezing bank margins for years. That margin squeeze can be suffocating for community banks. "Do we expect an impact? I think you don't have to look any further than (the Dodd-Frank Act)," said Caldwell of Middlefield Bank, which has just under $1 billion in assets. "There is no doubt that the biggest concern we have is what new legislation or regulatory actions are going to be taken to prevent this type of action in the future." Caldwell, a state delegate with the Community Bankers Association of Ohio, said smaller banks are more concerned about the regulatory impact than reviewing internal practices or customer distrust. "The bigger banks create these problems," he said. "But water runs downhill. And eventually, it's going to hit us, and we're going to have to deal with it. That's why you see consolidation within the industry. These smaller banks, at some point in time, are just saying we can't afford to do business as usual." Caldwell also lamented what often seems like lopsided treatment of large, Wall Street banks following revelations of scandal. "If my bank would've done something like this, I can almost guarantee I would be banned from banking, and probably made to pay a civil money penalty, and my board members probably would too," he said. Wells Fargo, a company with nearly $1.8 trillion in assets, was fined $185 million in September for the scandal. CEO John Stumpf, meanwhile, stepped down from his role in October, but he had the potential to still take home over $100 million if he was fired by their board of directors. That all has left many onlookers with a sour taste in their mouths. "As far as I'm concerned," Caldwell said, "these regulators or Congress need to start setting an example with these large banks and make the folks in charge of running these banks personally liable for what happens because we try to do things the right way, but disproportionately suffer the fallout." Twitter: @JeremyNobile ~~~~~~~~ By JEREMY NOBILE
Reference:
NOBILE, J. (2016). Banks large and small brace for shockwave of Wells Fargo scandal. Crain's Cleveland Business, 37(45), 0001.
NOBILE, J. (2016). Banks large and small brace for shockwave of Wells Fargo scandal. Crain's Cleveland Business, 37(45), 0001.
After reading the article answer the following questions:
1. Summarize the article and align it with the author’s main point. 2. How does this article contribute to contemporary thinking about business ethics? 3. How can you apply information in this article to your field? 4. How did this article fit your ethical view? 1. Summarize the article and align it with the author’s main point. 2. How does this article contribute to contemporary thinking about business ethics? 3. How can you apply information in this article to your field? 4. How did this article fit your ethical view?
Explanation / Answer
1. The scandal that occured at Wells Fargo had a devastating effect on the otehr banks especially small banks . These scandals started when banks started giving importance to higest business done and leading the race. This competitiveness is making banks especially large banks to commit such scandals. The ones suffering most from these are small banks because whenever such scandals occur, tough rules are brought and the effect is shown on small banks as the government cannot dare to touch large banks. Banks also are acting in a careless manner and try to analyse themselves only when they think they might get into trouble. Every banks large or small started getting into defensive mode after the Wells Fargo scandal and got ready to face the consequences of the scandal as per the author.
2. When one organisation does a thing the others follow. In business sector one change or fear of change makes every organisation related to that field act in the same way one after the other or all together. They get defensive and try to save themselves from the consequences which shows they all are alike which means the way business is seen and considered is contemporary.
3. Not only in banking in every industry such scandals and others being effected is present. For example if we take softwar eindustry after Satyam scandal , many other companies started verifying themselves and many people lost their jobs and many companies went into losses. This had a hige impact on software industry.
4. We generally think every business has it's own pros and cons and no matter how big our business is it faces same amount of heat from fire. This relates to how large and small banks equally feared of being targeted and started defending themselves which shows any business must be equally respected and safeguarded.