CAMBRIDGE, Mass. (Reuters) - The U.S. Comptroller of the Currency said a recent case against Wells Fargo & Co concerning phantom accounts highlights the risks other banks face in their efforts to sell new products to existing customers.
The comptroller, Thomas Curry, said on Thursday that other banks should review what risks may arise from efforts to “cross-sell” to existing customers, which he called a common strategy.
“We expect banks to assess and to mitigate those risks in advance and on an ongoing basis,” said Curry, speaking to Reuters after giving a speech at Harvard University. The agency will consider the case of Wells Fargo in its regular safety and soundness exams of other banks, he said.
Curry’s office, which oversees national banks, was among the regulators with whom San Francisco-based Wells Fargo reached a $190 million settlement last week over claims it created roughly two million accounts that customers did not want.
Curry said the Wells Fargo case boiled down to a matter of internal controls. “Banks need to adhere to the highest standards. This is a culture issue. You cannot as a bank abuse your customers’ trust,” he said at one point during his presentation.
In his remarks, Curry also defended capital requirements and other standards for banks and said they have made the institutions more competitive coming out of the last decade’s financial crisis. He said it would be a poor time to relax rules, as some have suggested as a way to encourage economic growth.
“Now is not the time to change course,” Curry said.
He cited improvements to bank balance sheets such that Tier 1 common equity is now about 13 percent of risk-weighted assets, up from 9 percent in late 2008, while the leverage ratio is now at 9.3 percent, about a third higher than in 2008.
“The high standards here in the U.S. have made our banks stronger in absolute terms and in comparative terms” against foreign banks, Curry said.
In August, the Bank of England eased a broad measure of capital adequacy for banks to help avoid crimping the flow of credit after the vote in June to leave the European Union. (reut.rs/2alqlXk)
Reporting by Ross Kerber in Cambridge, Massachusetts; Editing by Bernard Orr and Bill Rigby
Our Standards: The Thomson Reuters Trust Principles.