Bad behavior at America’s biggest banks is killing their credibility.
“Deep-seated cultural and ethical problems have plagued the financial services industry in recent years,” New York Federal Reserve President William Dudley said at a conference on banking culture Thursday. “This has eroded the industry’s trustworthiness.”
Dudley is one of the country’s top bank regulators. He worries that these tactics will hurt banks long term.
His remarks come on the heels of the fake accounts scandal at Wells Fargo, where the bank created as many as 2 million unauthorized credit and debit accounts.
The scandal has led to a huge public outcry, multiple investigations, and has led to the resignation of its CEO John Stumpf.
Dudley did not name Wells Fargo but his comments hinted at some of the problems at the bank. Several former employees told CNNMoney that they were retaliated against for filing ethics complaints within the bank.
Dudley asked: “When people speak up to point out potential conduct issues, how are they treated? Are they held up as examples to emulate, or are they discouraged or even penalized?”
The Fed has not acted on Wells Fargo. Instead its leaders say the Consumer Financial Protection Bureau, which has fined the bank, will lead the way and the Fed will coordinate with it.
However, Dudley’s comments are broader than Wells Fargo alone. In August, the Fed fined Goldman Sachs $36 million for leaking confidential documents from the Fed to some of its clients. It has fined other big banks, such as JPMorgan and Citi for activities that are rooted in bad behavior.
Dudley warned that big bank’s ethical problems could bruise it for years to come.
“I worry that, in the long term, an industry that develops a reputation for dubious ethics will not attract the best talent,” he said.
–Matt Egan contributed reporting to this article
