It's the topic the banking industry can't avoid, even when people prefer not to mention it by name: Wells Fargo.
Banking executives and consultants who normally focus on checking accounts and credit cards spent a recent conference talking about "cross-selling" and "incentive compensation." Those are code words for Wells Fargo, and the up to 2 million accounts that its employees opened without customer permission as they sought to meet unrealistic sales goals.
And circulating among Wells Fargo's biggest competitors is the scathing report from the bank's board of directors that laid blame for its toxic sales practices on negligent management.
Eager not to be the next Wells Fargo, some other big banks say they are examining their own practices against the board report and actively looking for ways to avoid any sales issues before becoming engulfed in a similar kind of scandal.
"Any major occurrence in the industry is going to impact us all," said Richard Hunt, president of the Consumer Bankers Association, the trade and lobbying group that organized the recent CBA Live gathering.
Wells had by far the most aggressive sales goals among the big banks, and the board's report said the problems date back at least 15 years – but that executives had little interest in dealing with the issue until it spiraled out of control. The board also reclaimed another $75-million in pay from former CEO John Stumpf and former community bank executive Carrie Tolstedt, saying they dragged their feet for years.
That report has been making its way through top executive offices at nearly every big bank, executives said.
JPMorgan Chase's upper management is reviewing the report, Chief Financial Officer Marianne Lake said last week. The same is happening over at Citigroup. Both banks have looked at their own sales behaviour, and say they found nothing amiss. Bank of America Chief Financial Officer Paul Dinofrio declined to say whether executives reviewed the report, but stressed "we feel good about our sales practices."
For the industry, the next potential shoe to drop will likely be from federal bank regulator the Office of the Comptroller of the Currency, whose bank examiners are currently combing through each of big bank sales programs. Their findings are expected this summer. And the Consumer Financial Protection Bureau is also doing its own investigation.
In the meantime, it was clear at CBA Live that managers were actively searching for ideas on how to stop what happened at Wells from potentially occurring at their banks.
"We need to do a better job in teaching our front-line employees to speak up when something doesn't smell right," Ed Dwyer, chief risk officer for community banking at U.S. Bank, said to fellow bank executives in a panel.
Nearly every breakout panel dealing directly or indirectly with sales practices was filled to capacity, or was standing room-only. They discussed possible industry-wide changes to how bank employees are paid, or allowing typically back-of-house departments of a bank – compliance and risk – to have just as much say on business decisions as the sales and marketing departments.
There was even talk about how bank compliance officers should be alerted to any potential whistleblower calls that may exist, typically something a company's human resources department would handle. It's a direct reaction to reports that Wells Fargo employees, who alerted management to the sales practices problems using the bank's ethics hotline, were sometimes fired for speaking out. Earlier this month, the Occupational Safety and Health Administration awarded $5.4-million to a Wells Fargo employee who was fired for raising alarms.
Bankers also want to allow move away from specific sales quotas at their branches, like how many checking accounts or credit cards each employee needs to open. Until this year, Wells Fargo management highlighted its "cross-sell ratio," which is the number of accounts or other services a Wells Fargo customer typically had at the bank. Wells was aiming for as many as eight per household, while most big banks aim to have two to three per customer.
After the scandal, Wells got rid of its sales goals and restructured how it pays employees to focus less on opening checking accounts and more on how those bank accounts are actually used. The bank also stopped referring to its branches as "stores." No other banks have made public wholesale changes to their sales programs like Wells Fargo, but nearly all the major banks have or are conducting reviews.
"Cross-sell for the sake of cross-sell is going to come back to bite you," said Nitin Mhatre, executive vice-president of community banking at Connecticut-based Webster Bank, which has about 175 branches in New England.
Mhatre said retail bank employees should instead focus on adding accounts or cards that seem a more natural fit for customers to expand their relationship with the bank, instead of trying to bolt on as many products as possible.
"The thinking inside each of your banks should be: 'How have you solved a need for a customer?,'" Mhatre said.