Forget the Federal Reserve and its prohibition against Wells Fargo’s further growth until its governance and risk management improve. Wells Fargo is now answering to Sister Nora Nash of the Sisters of St. Francis of Philadelphia.

The much-maligned bank has agreed to publish a business standards review to “investigate the root causes of systemic lapses in governance and risk management that have led to ongoing controversies, litigation and fines” in response to resolution filed for the 2018 proxy review by the Interfaith Center on Corporate Responsibility (ICCR), a 300-member organization comprised of faith communities, socially responsible asset managers, unions, pensions, NGOs, and other socially responsible investors with combined assets of over $400 billion.

Sister Nash led efforts of the 24 co-filers of the ICCR, which has engaged the top seven U.S. banks on controversies around risk, ethics and culture for several decades. Many of the 24 co-filers are communities of Catholic sisters.

“ICCR first requested this review in 2014 when Wells Fargo came in last in a benchmarking survey on risk management, responsible lending and other metrics,” the ICCR said in a press release. “With each new scandal and penalty as a result of aggressive cross-selling, car loan insurance issues, and mortgage fraud, we tried to impress upon management the need for a comprehensive review that will lead to systemic change. We are encouraged that they are finally agreeing to take this first step towards what we hope will be authentic reform.

The group is particularly concerned with Wells Fargo addressing the human components of risk management and would like to see the bank “make amends for the emotional and financial tolls their past practices and aggressive sales culture have taken on home owners, retail customers, employees and communities.”

The review will include six elements:

  1. Analysis of the impacts on the bank, its reputation, customers, and investors of the continuing scandals.
  2. Identification of the systemic cultural and ethical root causes of recent scandals, including at the board level.
  3. A framework to address the issues and embed systems throughout the company, including changes already implemented, establishment of grievance mechanisms, and plans to strengthen corporate culture and instill a commitment to high ethical standards at all employee levels.
  4. Key performance indicators to evaluate the effectiveness of changes instituted over time.
  5. A commitment to ongoing and regular disclosure of progress.
  6. Description of how the identified issues will be factored into employee and executive incentive and compensation decisions.

Image Source: Laura Pedrick for The New York Times

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