City Begins Closing Wells Fargo Bank Accounts After Scandal

New York City will no longer put money into its Wells Fargo bank accounts, saying the bank has not done enough to restore the public trust. Last year, the bank was forced to admit it created millions of individual customer accounts without the customers’ knowledge, in an effort to collect additional fees.

New York City has approximately $227 million in accounts with the bank and will begin moving the funds out over the course of a few years.

Wells is also being suspended for one year as an issuer of general obligation bonds for the city. Just 10 firms are authorized as lead underwriters, including Merrill Lynch, Bank of America, Goldman Sachs and Citigroup. A single bond issue can generate fees and commissions worth approximately $1 million to $2 million.

Mayor Bill de Blasio and City Comptroller Scott Stringer carved out one exemption: Wells can still issue bonds to finance affordable housing, “which has a direct benefit to New York City residents,” said a joint press release.

The mayor and comptroller say a deciding issue was the fact that Wells Fargo recently received a Federal Community Reinvestment Act (CRA) rating of “needs improvement.”

California and Illinois have already taken similar actions to loosen their ties to the bank.

Wells Fargo settled a number of lawsuits last year, but has been criticized for not making bigger changes to its corporate culture. Last month, shareholders elected or re-elected all the Wells Fargo directors proposed.

“Wells Fargo appreciates the continuing dialogue with New York City and deeply values our relationship with the city,” said the bank’s AnnMarie McDonald, in an emailed statement. “We hope to restore a national CRA rating that reflects our strong track record of lending to, investing in, and providing service to low- and moderate-income communities.”

Clarification: An earlier version of this story said that the city is closing its Wells Fargo bank accounts. The comptroller's office says that this process can take years, and during that time the situation could change. The bank could receive a more favorable CRA rating and restore a relationship with the city.