By Rachel Louise Ensign
Wells Fargo & Co. Chief Executive Tim Sloan stepped down Thursday, ending a 31-year career at the bank and a 2 1/2 -year slog to get it back on solid footing after a fake-account scandal badly damaged its reputation and standing with regulators.
C. Allen Parker, Wells Fargo's general counsel, has been named interim CEO. Mr. Parker joined the bank in 2017 from law firm Cravath, Swaine & Moore LLP to help clean up after the 2016 sales scandal.
The nation's fourth-largest bank said it would search for a new permanent chief executive from outside the company.
The change atop Wells Fargo could signal a reset of the bank's plans to put its problems behind it. Many of Wells Fargo's top executives, including Mr. Sloan, have spent decades at the bank, and critics have said those long-tenured leaders have hindered the company from adequately fixing deep-rooted issues.
Officials at the Office of the Comptroller of the Currency, one of the bank's primary regulators, were recently debating the rare step of forcing changes to Wells Fargo's senior management or board, The Wall Street Journal previously reported.
Mr. Sloan, 58 years old, informed the board on Tuesday of his decision to retire, according to a regulatory filing. He will receive the pay he has already been promised but won't get any additional retirement payment, the filing said.
In recent weeks, Mr. Sloan has faced renewed pressure from regulators and lawmakers to get the bank's problems under control. Washington's frustration with Mr. Sloan played a major role in his decision to retire, people familiar with the matter said.
"I could not keep myself in a position where I was becoming a distraction." Mr. Sloan said in a call with investors on Thursday.
The move marks a big and rapid reversal for Wells Fargo. In recent months, Mr. Sloan had said he wanted to stay on for at least another several years, and the bank's board had continued to express support for its embattled chief.
At a charity luncheon earlier Thursday, Warren Buffett, whose Berkshire Hathaway Inc. is the bank's biggest shareholder, said he supported Mr. Sloan "100%." He added, "I don't want his job."
Board chairman Elizabeth Duke said the bank hadn't reached out to any potential candidates. "We have a lot more work to do," she said of the bank's overall progress fixing itself.
Mr. Sloan said he spent his time as CEO trying to rebuild trust in Wells Fargo. "However, it has become apparent to me that our ability to successfully move Wells Fargo forward from here will benefit from a new CEO and fresh perspectives," he said in a statement.
Mr. Parker is one of the few outsiders Wells Fargo has added to its top ranks since the sales scandal erupted.
Mr. Sloan approached him about serving as the bank's top lawyer at the end of 2016, around the same time Mr. Parker wrapped up a stint as Cravath's "presiding partner." Mr. Parker had known Mr. Sloan for several years and had done legal work for the bank.
"There's no doubt in my mind that it will be a highly challenging job," Mr. Parker said at the time.
Until the 2016 scandal, Wells Fargo enjoyed a sterling reputation as a bank that dodged the worst abuses of the financial crisis. But by the time Mr. Sloan took over after the scandal broke, leading to then-CEO John Stumpf's resignation, the bank's folksy image was in tatters.
He quickly set out to repair it, launching a deep review of every business. Mr. Sloan knew the company well, having worked his way up through its wholesale-banking unit before serving as chief financial officer and, most recently, chief operating officer.
Yet problems continued to emerge throughout the bank. Nearly every one of its business lines is under investigation by a government agency, including the Justice Department and the Securities and Exchange Commission.
The bank also has struggled to put in place a new risk-management system -- the infrastructure designed to catch and prevent problems that could harm customers. In an April 2017 report, Wells Fargo's board said the bank had made a grave mistake letting business units police themselves.
The Federal Reserve took the rare step of capping the bank's growth in February 2018, citing risk-management deficiencies. A few months later, the Consumer Financial Protection Bureau and the OCC imposed a $1 billion fine on the bank for misconduct in its auto- and mortgage-lending business. The OCC said it found risk-management deficiencies that "constituted reckless, unsafe or unsound practices," leading to improper charges to hundreds of thousands of consumers.
Investors also have been skeptical. Wells Fargo's shares rose about 8% during Mr. Sloan's tenure, compared with a nearly 30% increase in the KBW Nasdaq Bank Index. The shares rose in after-hours trading Thursday, following Mr. Sloan's resignation.
Mr. Sloan never managed to convince regulators and others in Washington that he was the right person to fix the beleaguered bank. "About damn time," Sen. Elizabeth Warren (D., Mass.), who is currently running for president, tweeted Thursday following Mr. Sloan's resignation. "Tim Sloan should have been fired a long time ago."
Earlier this month, Mr. Sloan testified before the House Financial Services Committee and engaged in combative exchanges with Republicans and Democrats alike. Minutes after the hearing ended, the OCC issued a rare statement, saying it was "disappointed with [Wells Fargo's] performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program."
In a regulatory filing released the next day, Wells Fargo said its board awarded Mr. Sloan a 5% pay increase in 2018 from the prior year. House Financial Services Committee Chairwoman Maxine Waters (D., Calif.) called the pay package "outrageous and wholly inappropriate" and urged the bank to fire Mr. Sloan.
--Nicole Friedman contributed to this article.
Write to Rachel Louise Ensign at email@example.com