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The state of California will no longer use Wells Fargo as an underwriter for the issuance of state municipal bonds, and the bank will have no involvement in the state’s banking or investment activities for the next 12 months.
California is the largest issuer of municipal bonds and the home state of Wells Fargo.
In a release, the state’s treasurer admonished Wells Fargo for its recent fake-accounts scandal.
“Wells Fargo’s fleecing of its customers by opening fraudulent accounts for the purpose of extracting millions in illegal fees demonstrates, at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed,” John Chiang, the state treasurer, said in the release.
If the bank fails to meet California’s standards during the 12 months, the state could permanently sever ties with Wells, according to the release.
The release also said that the state currently has $2.3 billion invested in Wells Fargo “fixed income securities and equity.”
Wells Fargo is one of the top banks for debt deals in the US. It ranked fourth in US debt capital markets activity in the year to September 23, ahead of the likes of Goldman Sachs and Morgan Stanley, according to data from Dealogic.
The bank has been embroiled in a scandal in recent weeks, after it was revealed that bank employees opened roughly 2 million accounts without the knowledge of customers between 2011 and 2015.
Since the announcement of Wells’ settlement with regulators for $185 million earlier this month, CEO John Stumpf has testified before the Senate banking committee and forfeited $41 million in stock-based compensation.
Chiang said he sent the letter to Stumpf and noted that the state similarly sanctioned HSBC earlier this year. He drew comparisons among Wells, HSBC, and financial institutions that failed during the financial crisis.
“Just as Lehman Brothers and Bear Stearns learned the hard way that no bank is truly too big to fail, those banks which survived the Great Recession must now learn that they are not so powerful as to be untouchable,” Chiang said in the release.