Wells Fargo Case Summary
Currency risk:
Finance committee should assess interest rate risk, market risk, and currency risk by using hedge derivatives. Wells Fargo recorded derivatives on balance sheet at fair value, and volume measured in terms of notional amount. Wells Fargo enters into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge Wells Fargo’s foreign currency risk and interest rate risk associated with the insurance of non-U.S. dollar denominated long-term debt.
Likelihood of Events: ⅕ ; Magnitude of Event’s Consequences: ⅘ (see Exhibit 3)
Fraud Triangle:
One of the incentives was related to the compensation plans. The compensation plan for Wells Fargo is that branch bankers need to meet some threshold criteria to be
eligible for incentive compensation. In addition, there is 11 ways to rewards their employees, such as based on the number of products they sold per day. Since Wells Fargo’s incentive compensation plans are emphasized on the high sales volume, which lead to the unethical behavior. The unethical behavior of creating nonexistent benefited the employees by letting them break the performance targets.
In U.S., customers have more opportunities to obtain credit cards from banks such as Wells Fargo. Unlike in Canada, banks require a proof of incomes payrolls from customers in order to register a credit card. Especially when the front tellers and supervisors had the opportunities to sell other bank products that is tied with its compensation plan. The cross selling of other bank products did not require the consent from the customers.
One of the rationalisation for the tellers and supervisors was that they did aware of other tellers and supervisors who were also doing the same thing. Also, on one was penalized or caught by the action of creating nonexistent accounts or falsely credit cards. In addition, the company’s environment also contributed to the rationalisation of the fraud, which the lower level employees think it was necessary to meet the target that was set by the supervisors and employers to benefit the company.
Finance committee should assess interest rate risk, market risk, and currency risk by using hedge derivatives. Wells Fargo recorded derivatives on balance sheet at fair value, and volume measured in terms of notional amount. Wells Fargo enters into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge Wells Fargo’s foreign currency risk and interest rate risk associated with the insurance of non-U.S. dollar denominated long-term debt.
Likelihood of Events: ⅕ ; Magnitude of Event’s Consequences: ⅘ (see Exhibit 3)
Fraud Triangle:
One of the incentives was related to the compensation plans. The compensation plan for Wells Fargo is that branch bankers need to meet some threshold criteria to be
eligible for incentive compensation. In addition, there is 11 ways to rewards their employees, such as based on the number of products they sold per day. Since Wells Fargo’s incentive compensation plans are emphasized on the high sales volume, which lead to the unethical behavior. The unethical behavior of creating nonexistent benefited the employees by letting them break the performance targets.
In U.S., customers have more opportunities to obtain credit cards from banks such as Wells Fargo. Unlike in Canada, banks require a proof of incomes payrolls from customers in order to register a credit card. Especially when the front tellers and supervisors had the opportunities to sell other bank products that is tied with its compensation plan. The cross selling of other bank products did not require the consent from the customers.
One of the rationalisation for the tellers and supervisors was that they did aware of other tellers and supervisors who were also doing the same thing. Also, on one was penalized or caught by the action of creating nonexistent accounts or falsely credit cards. In addition, the company’s environment also contributed to the rationalisation of the fraud, which the lower level employees think it was necessary to meet the target that was set by the supervisors and employers to benefit the company.