New York City voted on Wednesday to suspend Wells Fargo from its municipal debt issuance operations, citing a rating tied to doing business in low and moderate-income communities as having fallen below a “satisfactory” level.
The commission also cited last year’s scandal, in which the bank was caught creating bogus customer accounts to boost performance measures.
The New York City Banking Commission, in a unanimous 3-0 vote, decided it will give no new bond underwriting mandates or renew existing contracts with Wells Fargo. The decision follows a Federal Community Reinvestment Act (CRA) rating of “needs improvement” for the San Francisco-based bank.
The decision adds New York City to other states and municipalities that have banned the bank from handling their funding operations.
The commission was composed of Mayor Bill de Blasio, Comptroller Scott Stringer and Commissioner of Finance Jacques Jiha.
“What happened at Wells Fargo was fraud – and there must be consequences for wrongful behavior,” Stringer said in a statement.
Wells Fargo, however, was given a conditional designation as a New York City bank. That means it can still hold funds under current contract because it would be too disruptive to immediately disentangle the city from the bank.
“The ban will be revisited only when the bank’s rating is raised,” de Blasio and Stringer said in a joint statement prior to the vote.
The Wells Fargo scandal and the repercussions on its municipal banking operations contributed to a slump in its underwriting business, Reuters reported earlier this month.
Prior to the vote, the bank told Reuters it appreciated the continuing dialogue with the city.
“More than four years have passed since the end of our last CRA evaluation period and we are seeking an expedited review of the 2012-2015 exam,” Wells Fargo spokesman Gabriel Boehmer said in an email.
Wells Fargo holds $227 million of collected city taxes and fees and acts as a trustee to the New York City Retiree Health Benefits Trust, currently holding its roughly $2.6 billion in assets.
The ban will suspend the bank’s role as a senior book-running manager for the city’s General Obligation as well as Transactional Finance Authority bond sales.
“The only allowable exemption will be for affordable housing financing, which has a direct benefit to New York City residents,” the joint statement said.
REUTERS
By Dan Freed | NEW YORK
Wed May 31, 2017 | 6:10pm EDT
(Reporting by Dan Freed; Additional reporting and writing by Daniel Bases, editing by G Crosse and Dan Grebler)