Wells Fargo has been hit by the US consumer finance watchdog's largest fine to date after regulators found staff racing to meet sales targets secretly opened millions of accounts without customers' knowledge.

Thousands of employees at the world's most valuable bank may have opened more than two million deposit and credit card accounts across the country without customers' permission, the Consumer Financial Protection Bureau (CFPB) said on Thursday. Wells will pay $185 million in fines as well as restitution.

The aggressive regulatory stance is likely to send a chill through the sector, which is under political scrutiny in the run-up to the presidential election as well as financial pressure from rock-bottom interest rates to boost profits.

Richard Cordray, director of the CFPB, said the penalty "should serve notice to the entire industry".

“If the incentive compensation schemes or sales targets are implemented in ways that threaten harm to consumers and lead to violations of the law, then banks and other financial companies will be held accountable,” he told reporters.

Black eye

Created after the 2008 financial crisis to boost protection for ordinary bank customers, the CFPB has up to now refrained from big fines. The action is also a black eye for Wells Fargo, which is mostly a retail bank and has largely avoided the scandals that have engulfed its Wall Street rivals.

Banks have sought to offset some of the pressure on their businesses by “cross-selling” customers more products and services – such as convincing current account holders to take out insurance or make pension investments.

Under chief executive John Stumpf, the strategy has been a particularly important part of the business model at Wells Fargo. As of May, Wells had sold an average 6.27 products to each household that has a current account with the bank – a push that has helped its market capitalisation swell to $250 billion, making it the world's most valuable lender.

But Thursday’s findings cast an unfavourable new light on how the bank has expanded. Since at least 2011, the CFPB said, thousands of employees took part in what the regulator called “illegal acts”. Staff funded the new, unauthorised accounts by moving money that belonged to customers without their consent.

As a result, the watchdog said, many consumers were hit with annual fees, overdraft-protection charges and other costs.

Debit cards

Staff also set up debit cards without consumers’ knowledge – even going so far as creating pin numbers for consumers without telling them.

Wells Fargo said it had set aside $5 million for customer remediation. In a statement it said: “Our entire culture is centred on doing what is right for our customers. However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action. Today’s agreements are consistent with these beliefs.”

The presidential election put banks back in the spotlight earlier this year as Bernie Sanders, the left-winger who unsuccessfully challenged Hillary Clinton for the Democratic nomination, railed against their perceived bad behaviour.

However, with the general election campaign now in full swing Wall Street reform has taken a back seat, as neither Mrs Clinton nor Donald Trump, who both have ties to the finance world, appear eager to talk about banks.

The bank will pay $100 million to the CFPB, the largest penalty the bureau has imposed since it was set up after the last financial crisis. It will also pay $35 million to the Office of the Comptroller of the Currency and another $50 million to the City and County of Los Angeles.

The penalty is an important setback for Wells Fargo. Marty Mosby, analyst at Vining Sparks, said the bank's success at cross selling has been "a core part of what makes Wells different."

– Copyright The Financial Times Limited 2016