Wells Fargo Fraud Exposes Soft Spot In Bank Supervision, Law 360

The focus on those risks shows a shortcoming in the way supervisors think about regulation that is beginning to change, said Mayra Rodriguez Valladares, the principal at consulting firm MRV Associates.

The incentive structure and account opening practices at Wells Fargo fall under the broad category of operational risk, which has been “the ugly stepchild” of bank regulation, she said.

“Embedded in decades of bank regulations and then bank exam processes is a big bias toward credit risk, not operational risk,” Rodriguez said.

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