The ripple effects from the Wells Fargo sales abuse scandal may turn out to be smaller than bankers had initially feared.
Banks large and small have been waiting anxiously to see how much regulators’ expectations are going to change in the wake of the Wells scandal. The fear was that the San Francisco bank, on a short leash with its regulators, would eliminate performance-based pay, putting pressure on other banks to follow suit.
Wells Fargo is keeping many details under wraps, but the revised scheme appears to bring the $1.9 trillion-asset company into closer alignment with the rest of the sector, consultants said. Notably, the new plan does not get rid of incentive pay, which has long been a staple of compensation plans throughout the retail banking industry.
“I think the construct was not that radical, and I’m happy that it wasn’t,” said Darryl Demos, an executive vice president at Novantas. “They could have easily overreacted.”[…] “It’s not about how many accounts have you opened, how many new products or solutions have you sold. But rather, it’s about attracting new primary customer relationships to the bank,” Shrewsberry said.
Those changes drew mixed reviews from outside observers.
Demos, the Novantas consultant, said that it makes sense to emphasize customers’ product use, as opposed to just sales, in an incentive pay formula. “This one approach, if they’d put that in place, might have kept them out of hot water,” he said.
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