Created during the savings-and-loan crisis, the 1989 law allows regulators to vet and veto candidates for senior roles at banks, but that power is typically reserved for financially troubled firms.
Regulatory sources said the review by the Office of the Comptroller of the Currency (OCC) was so unusual because Wells Fargo, the nation’s fourth-largest lender, is both financially sound and so big.
The CEO candidate must complete a 17-page document detailing their work history, qualifications, finances and business dealings. They must also agree to hand over their tax records, provide copies of their fingerprints and possibly submit to a background check, according to public OCC documents.
Otting will have some discretion, however, as to just how far the agency goes in using its extensive powers to dig into the candidate’s background.
The unusual burden underscores how much work the San Francisco-based bank still has to do to regain the trust of its regulators and further raises the bar for its CEO search.
“Finding a new CEO was going to be difficult before, but this has made it even harder,” said Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading. “The difficulty was upped to 10.”
Regulators expect bank CEOs to be suitable for the top job and do not typically become involved in the selection process.
“That reflects a lack of trust in the institution’s ability to solve their problems,” said Thomas Vartanian, a law professor at George Mason University and former OCC official.
Another former OCC official who spent decades with the agency said he could not recall a comparable case.
“What makes it unusual is it’s in a bank of this size,” said the former official, who requested anonymity to discuss an enforcement matter. “It shows the OCC is taking this seriously.”
Wells Fargo and the OCC declined to comment. Spencer Stuart, the executive search firm hired to find Sloan’s replacement, did not respond to requests for comment.
If Otting decides to use all his powers, the vetting process could resemble that undergone by Senate-nominated officials.
Candidates would have to detail a range of firms they are or have been associated with, and any parallel discussions with potential rival employers.
They would also have to disclose if they have been involved in a failed regulatory application, such as for a merger or license, or associated with a firm that failed, defaulted on an obligation, or was subject to enforcement actions, criminal action, litigation or other legal woes.
The background probe could also draw on information provided by the FBI, state regulators, the Treasury’s anti-money laundering bureau, the Securities and Exchange Commission and the Department of Homeland Security, among others. Minor traffic violations need not be included.
The regulatory and political scrutiny “is going to discourage some candidates,” said Steve Potter, CEO of Odgers Berndtson US, an executive search firm that has helped other banks hire CEOs.
Extensive vetting has claimed candidates for government posts, including Andrew Puzder, U.S. President Donald Trump’s first pick for Labor Secretary. He withdrew from consideration in 2017 after it emerged he had employed an undocumented housekeeper.
Otting has not said if he will use all his vetting powers and can waive those he feels are redundant.
But he is unlikely to cut corners amid pressure from congressional Democrats, who have frequently accused the OCC of being too soft on the industry, Boltansky said.
“Why would Otting use up any of his limited political capital to help a bank that continues to trip on its own shoelaces?”