In a story that reads like a comedy of errors, minus the comedy, Texas-based Comerica Bank finds itself in a pickle that’s more sour than sweet. The bank, known for its wealth-management prowess, recently attempted a technology upgrade that turned out to be more of a downgrade, leaving it millions in the red. It’s like trying to install a fancy new alarm system and accidentally locking yourself out of the house – permanently.
This technological faux pas has caught the eagle eye of the Office of the Comptroller of the Currency, which is now probing into this digital disaster. Picture this: a wealth management platform change that’s supposed to be a smooth transition, but instead, it’s like a clown car of errors, with one problem tumbling out after another.
The heart of the issue lies in Comerica’s handling of trust assets managed by third parties like Morgan Stanley or UBS. Typically, when clients withdraw funds from these trusts, Comerica fronts the cash and later gets reimbursed by the managers. Sounds simple, right? But post-May’s platform change, this process hit a snag, and Comerica found itself unable to reel in the reimbursements, creating a financial black hole where their funds used to be.
Brian Wolfe, a managing director at Comerica, lamented in an email that their general ledger account for wealth management was still “significantly overdrawn.” It’s like throwing a party, expecting everyone to bring a dish, and ending up with a table full of empty platters.
To add to the fiasco, some trust-account payments on the new platform were playing a game of hide and seek – some didn’t show up, others appeared multiple times or with incorrect amounts. It’s financial whack-a-mole at its finest. Consequently, the bank hit pause on wealth-management fees for some accounts, worried that the balances and fees might have been more twisted than a pretzel due to these errors.
The platform, in a bid to keep everyone on their toes, has been crashing repeatedly, including a spectacular nosedive as recently as last Tuesday. Greg Carr, executive vice president of wealth management at Comerica, tried to brush it off as “really standard issues” in an interview. But let’s face it, when your standard issues involve millions of dollars, it’s like saying getting struck by lightning is just bad weather.
In a scramble to fix this mess, Wolfe urged employees to collect the funds, or else they’d have to write them off as losses. Meanwhile, the bank’s executives are biting their nails, fearing potential litigation from trust clients.
As of now, less than $500,000 has been written off, which in banking terms, is like finding a few coins under the couch cushions. But for Comerica, which is already grappling with a 28% profit drop amid rising interest rates and a competitive scramble for wealthy customers, this tech debacle is about as welcome as a skunk at a garden party.
The update, which had been on the drawing board for years but repeatedly shelved due to unsuccessful test runs, was finally launched in May. But some employees had concerns it wasn’t ready for prime time – concerns that turned out to be as valid as a fire alarm in a match factory.
Now, Tom Oehmler, president of Comerica Trust, has taken an indefinite leave, and several employees who reported to him have left the bank. It’s like watching the crew abandon ship while it’s still in the harbor. To add to the drama, Comerica has roped in advisors from PwC to help sort out this mess.
As the saga unfolds, one can’t help but wonder if Comerica’s ambitious leap into the future of banking tech was more of a stumble into a financial quagmire. Stay tuned as we keep a watchful eye on this high-stakes game of financial Jenga!