Wells Fargo plans third-party racial equity audit

The announcement that the bank hired law firm Covington & Burling to do an assessment comes as CEO Scharf prepares to appear at a pair of congressional hearings.

Wells Fargo & Co. will commission a third-party racial equity audit after years of advising shareholders to vote against one, as Chief Executive Charlie Scharf prepares to appear at a pair of congressional hearings.

The audit will examine Wells Fargo’s business in diverse communities and support of diversity in its workforce, according to a statement Tuesday. Wells Fargo hired law firm Covington & Burling to do the assessment and plans to publish results by the end of next year.

Wells Fargo has come under fire from lawmakers this year after a Bloomberg News investigation found the lender approved fewer than half of mortgage refinancings sought by Black homeowners during the pandemic, a lower rate than for White applicants. The scrutiny was further heightened by a New York Times report that the wealth management division had conducted sham interviews with Black and female candidates for positions that were no longer available, prompting the firm to review and adjust hiring practices.

“Commissioning this work is a critical next step in reinforcing our commitment to racial equity and closing the wealth gap in this country,” Scharf said in the statement. “We consistently strive to measure our progress and hold ourselves accountable.”

Wells Fargo joins rivals JPMorgan Chase & Co. and Citigroup Inc. in agreeing to such an audit. The San Francisco-based firm urged shareholders to vote against a shareholder-proposed racial equity audit earlier this year and last year, arguing that it was already committed to advancing diversity, equity and inclusion. On both occasions, shareholders rejected the proposals.

There are some differences, at least in phrasing, between the audit proposed at this year’s annual shareholder gathering and what Wells Fargo said it’s undertaking. The earlier proposal asked the board to study the lender’s “adverse impacts” on communities of color. In its statement Tuesday, the bank said the review will focus on efforts to “serve diverse communities and promote a diverse workforce.”

Scharf and peers including JPMorgan CEO Jamie Dimon are set to testify before the House Financial Services Committee and Senate Banking Committee next week.