Fed's Dudley says Wells Fargo scandal shows poor incentives at work
By David Milliken
LONDON (Reuters) - A top U.S. Federal Reserve regulator on Tuesday cited Wells Fargo & Co's accounts scandal as evidence that incentives to drive performance remain a problem on Wall Street, saying banks had "a long way to go" to reform their internal operating culture.
William Dudley, president of the New York Fed branch that acts as the U.S. central bank's eyes and ears on Wall Street, has complained about rotten bank culture for years.
In a speech to bankers and regulators in London, he said the Wells (WFC.N: Quote) case showed that "compensation, once again, seems to be at the center of a scandal".
It was found last year that thousands of employees at the U.S.-based bank had opened perhaps millions of unauthorized customer accounts, a scandal that rocked the bank and led its chief executive, John Stumpf, to resign.
Dudley, who did not discuss monetary policy or the state of the economy, said the Wells case appeared to involve "widespread fraud".
He added: "Incentives shape behavior, and behavior drives culture."
Speaking later at a Bank of England event to promote ethical conduct in the financial sector, he said bank culture needs to be improved, suggesting that senior executives lead by example and that firms reward employees who speak out.
Asked if progress in making banks safer risked being reversed under the administration of U.S. President Donald Trump, Dudley said he was still waiting to see what changes there might be. Continued...