Image copyright AFP 
 
 Wells Fargo chief executive John Stumpf will forfeit $41m (£31.5m) in bonuses as the bank tries to deal with a scandal over its sales practices. 
 
 The bank is investigating how two million accounts were opened without customers' permission. 
 
 It said Mr Stumpf, who was paid $19.3m last year, would not receive a salary during the inquiry. 
 
 The former head of retail operations, Carrie Tolstedt, will forfeit $19m of bonuses and left without a payoff. 
 
 California, meanwhile. announced it was dropping Wells Fargo as its bond underwriter and broker-dealer because of the scandal. 
 
 The US state's sanctions against the bank will take effect immediately and remain in place for a year, said its officials. 
 
 Media playback is unsupported on your device Media caption Elizabeth Warren mauls 'gutless' Wells Fargo boss 
 
 "Wells Fargo's fleecing of its customers by opening fraudulent accounts for the purpose of extracting millions in illegal fees demonstrates, at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed," said California treasurer John Chiang. 
 
 The announcement comes ahead of Mr Stump's appearance before the House Financial Services Committee, scheduled for Thursday. 
 
 He is expected to face another tough questioning similar to his appearance before the Senate Banking Committee last week. 
 
 The bank said forfeiting bonuses and payoff did not mean there might not be more salary clawbacks from Mr Stumpf or Ms Tolstedt, depending on the results of the investigation. 
 
 "We will proceed with a sense of urgency but will take the time we need to conduct a thorough investigation," Stephen Sanger, Wells Fargo's lead independent director, said in a statement. 
 
 Earlier this month, Wells Fargo was fined $185m and accused of "widespread illegal practice" by the regulators. 
 
 Wells Fargo has fired more than 5,000 staff in response to the scandal. Mr Stumpf has so far ignored calls for him to step down. 
 
 'Deeply sorry' 
 
 During the hearing by a panel of US senators on 20 September, Mr Stumpf said he was "deeply sorry" for that and failing to act quickly. 
 
 "There is no question with some of our customers we violated trust," he said. "We never directed nor wanted our team members to provide products and services to our customers that they didn't want. 
 
 "That said, I accept full responsibility for all unethical sales practices," he added. 
 
 Image copyright Getty Images 
 
 During the questioning, Senator Elizabeth Warren, who has long been a critic of the US banking industry, was unmoved by his apology. 
 
 "You squeezed your employees to the breaking point so they would cheat customers,'' she said. 
 
 "You should resign. You should give back the money you took while the scam was going on," she added. 
 
 Record fine 
 
 Wells Fargo said it would be contacting every deposit customer across the country to see if their accounts were properly authorised. 
 
 It will also contact hundreds of thousands of customers with open credit cards to see if they want or need those cards. 
 
 In the future, confirmation emails will be sent to customers within one hour of the opening of a new deposit account. 
 
 The fine imposed on the bank by the US Consumer Financial Protection Bureau was the largest ever imposed by the regulator. ||||| Wells Fargo CEO John Stumpf will forfeit much of his 2016 salary -- including his bonus and $41 million in stock awards -- as the bank launches a probe into its phony accounts scandal. 
 
 The fallout from the controversy has also resulted in its first major executive departure. Carrie Tolstedt, who headed the division that created the fake accounts, has left the company ahead of her scheduled retirement at year end. 
 
 Wells Fargo, under pressure from lawmakers and shareholders to take action, said Tolstedt will not receive a bonus or severance, and that she'll forfeit all of her $19 million worth of unvested stock awards. Wells Fargo also said Tolstedt has agreed not to exercise some $34 million in stock options, the bank's independent directors announced Tuesday. 
 
 However, Tolstedt could still be walking away with a fortune despite running the retail bank during the entire time the unauthorized accounts were opened. 
 
 Tolstedt owns roughly $43.3 million in stock outright that she accumulated during her career with the bank, according to a letter Wells Fargo sent to Senator Elizabeth Warren. That means if she is allowed to keep her stock options, Tolstedt could leave Wells Fargo with stocks and options valued today at roughly $77 million. 
 
 Related: Wells Fargo fake accounts head could still walk with $77 million 
 
 Wells Fargo's board of directors also said Tuesday that it's launching an independent investigation into the company's sales practice. The new probe comes as employees told CNNMoney that the practice of opening fake accounts began years earlier than Wells Fargo has previously acknowledged. 
 
 During the company's investigation, Stumpf will work for free. 
 
 Stephen Sanger, the board's lead independent director, said the executives could face further penalties, depending on the results of the investigation. 
 
 He said in a statement that the board may claw back additional compensation or take "other employment-related actions." It's not clear if that could include forcing out Stumpf, who Warren and others have demanded should resign. 
 
 If they're cleared of wrongdoing, both Stumpf and Tolstedt may end up taking home some of their hefty pay packages. 
 
 The decision to "claw back" Stumpf's and Tolstedt's compensation comes just before Thursday's big Wells Farg (WFC)hearing in front of the House Financial Services Committee and amid a string of embarrassing headlines about the opening of unauthorized accounts. 
 
 Wells Fargo paid Stumpf $19.3 million in total compensation for 2015, in part as a reward for the bank's growing number of accounts. Millions of those accounts, as it's been since revealed, were fake. An intense focus from top management on adding new accounts, former employees say, led to a pressure-cooker atmosphere at Wells Fargo. 
 
 Related: Fired Wells Fargo workers fight back with lawsuit 
 
 Last year, Stumpf was awarded with $4 million for various factors that included growing "primary consumer, small business and banking checking customers." Wells Fargo also rewarded Stumpf last year for his success in "reinforcing a culture of risk management and accountability across the company." 
 
 That bonus led Jeffrey Sonnenfeld, an authority on corporate governance at Yale University, to say that "without a doubt" some of Stumpf's pay should be clawed back. "He should be docked," Sonnenfeld said. 
 
 A CNNMoney analysis, conducted prior to the clawbacks, showed that if he were to leave, Stumpf could leave Wells Fargo with about $200 million of cash, Wells Fargo stock and options. 
 
 Last week, Warren slammed Stumpf for "gutless" leadership, in part for his refusal to cut compensation for Tolstedt, who led Wells Fargo's community banking division during the entire time fake accounts were created. 
 
 Warren also came down heavy on Stumpf on his own pay: When it all blew up, you kept your job, you kept your multimillion dollar bonuses, and you went on television to blame thousands of $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich." ||||| The longtime chief executive of Wells Fargo agreed on Tuesday to forfeit $41 million in performance pay three weeks after the bank acknowledged that for at least five years, thousands of low-level employees set up sham accounts to meet sales quotas. 
 
 The San Francisco-based bank has repeatedly apologized for the scheme and said it had fired 5,300 employees for misconduct and put in place more stringent internal controls. But that has not been enough for lawmakers, who have been pushing for the company’s top leaders to give back the millions of dollars in bonuses they earned while the irregularities were occurring. 
 
 The independent directors of the Wells Fargo board announced Tuesday that they were launching an investigation into the bank’s retail business. 
 
 “We are deeply concerned by these matters, and we are committed to ensuring that all aspects of the Company’s business are conducted with integrity, transparency, and oversight,” Stephen Sanger, the lead independent director, said in a statement. Sanger, who has been a member of Wells Fargo’s board since 2003, is the former chairman of General Mills, the packaged-food company. 
 
 John Stumpf, the chief executive, will forfeit unvested stock awards worth about $41 million, will not receive a salary while the investigation is underway and will not be eligible for a 2016 bonus, the committee said in a statement. Carrie Tolstedt, the former head of Wells Fargo’s community banking unit, where the misconduct took place, will give up $19 million in unvested stock awards and not be eligible for a 2016 bonus. Tolstedt had announced her retirement in July but had initially planned to stay at the bank until the end of the year. 
 
 In a tense exchange, Senator Elizabeth Warren badgered Wells Fargo CEO John Stumpf on why he had not offered to give up any of his compensation or to resign in the wake of the fake accounts controversy. (Reuters) 
 
 Stumpf and Tolstedt still have millions of dollars in stock and other compensation from Wells Fargo. Stumpf, for example, was awarded $161 million in bonuses and performance awards between 2011 and 2015, the period in which the misconduct took place, according to Equilar, a research firm. Tolstedt was awarded more than $60 million in bonuses in the same period. 
 
 But this action by the bank’s board is, by far, the most aggressive and public effort by a bank since the 2008 financial crisis to show that top executives will be held responsible for their companies’ misdeeds. 
 
 In early September, Wells Fargo was fined $185 million by regulators after it discovered that thousands of employees were setting up unauthorized accounts, including credit cards and checking accounts, that customers had not requested. In some cases, the customers were charged various fees for accounts they did not know existed. 
 
 The case has sparked a national outcry, with lawmakers pummeling Stumpf before the Senate Banking Committee last week, with one even calling on him to resign. He is to be the only witness before the House Financial Services Committee when he attends a hearing this week, and the move to take back financial awards could help head off some of the inevitable anger of lawmakers. 
 
 The debate comes as regulators try to finalize rules called for by the 2010 financial-reform bill, known as Dodd Frank, to overhaul the way Wall Street executives are paid and to address years of complaints that excessive bonuses helped lead to the 2008 financial crisis. 
 
 The long-awaited rules were aimed at stopping executives from making risky financial bets to boost their pay and then collecting large bonuses before the consequences of their actions are clear. But the banking industry is mounting a counterattack against the rules, which critics say do not allow enough flexibility. Some employees would be subject to claw-backs for up to 11 years after being awarded bonuses, much longer than the current industry standard of three to five years, industry officials have said. 
 
 In July, Wells Fargo joined the debate, saying it was concerned that the rules may have unintended consequences. “We have worked, and are continuing to work, diligently . . . to improve and evolve our incentive-based compensation practices,” Hope Hardison, Wells Fargo’s director of human resources, said in a letter to regulators. 
 
 But the rules would “create an un-level playing field, driving high-quality talent” away from big banks subject to the rules, she wrote. 
 
 The controversy surrounding Wells Fargo is likely to make it more difficult for banks to mount efforts to weaken the rules, industry officials say. 
 
 Stumpf is expected to face tough questioning when he appears before the House Financial Services Committee on Thursday. In addition to questions about executive compensation, he is likely to face questions about a recently launched Labor Department inquiry into the bank. 
 
 The Labor Department says it is conducting a “top-to-bottom review” of Wells Fargo after lawmakers complained that the bank’s workers were forced into a hypercompetitive environment that led thousands of them to set up the sham accounts to meet aggressive sales goals. 
 
 Some former employees allege that they were unfairly fired when they did not cut corners to meet Wells Fargo’s aggressive sales targets. 
 
 That could violate federal rules, according to lawmakers and some labor experts. Last week, former Wells Fargo employees who say they were fired for following the law filed a $2.6 billion lawsuit against the bank. They are seeking class-action status. 
 
 The Labor Department said it has set up a working group to expedite a review of the issue. 
 
 “Given the serious nature of the allegations . . . I have directed enforcement agencies within the Department to conduct a top-to-bottom review of cases, complaints, or violations concerning Wells Fargo over the last several years,” Labor Secretary Thomas Perez said in a letter released Tuesday by Sen. Elizabeth Warren (D-Mass.), who had asked the agency to look into the matter. 
 
 “We take the concerns raised . . . very seriously,” Perez wrote. 
 
 A Wells Fargo spokeswoman declined to comment on the Labor Department review. 
 
 It is just the latest sign that San Francisco-based bank will be grappling with the fallout from this case for some time. Federal prosecutors are considering civil or criminal charges against the bank.
– John Stumpf, the Wells Fargo CEO slammed for his "gutless leadership" by Sen. Elizabeth Warren last week, is going to have to tighten his belt a little this year: He will forfeit his bonus, part of his salary, and $41 million in stock awards over the fake-account scandal that saw the sacking of 5,300 employees, CNN reports. In addition, Stumpf will work for free while the company conducts an investigation. The bank's board of directors also says Carrie Tolstedt, who headed the retail division where workers created the phony accounts, will forfeit at least $19 million of the $125 million she was going to leave the company with at the end of the year, and will not receive severance or a bonus for 2016. The announcement comes as Wells Fargo is set to go before the House Financial Services Committee on Thursday. The board says it is launching an independent investigation into how millions of accounts were created without the permission of customers, the BBC reports. Wells Fargo was fined $185 million over the scandal and the Washington Post describes the board's cash clawback as "by far the most aggressive and public effort" since the 2008 financial crisis to punish bank chiefs for misconduct—although Stumpf still has the estimated $161 million he received in bonuses over the five years the scam took place, and Tolstedt received $60 million over the same period. (Wells Fargo whistleblowers say they were fired for speaking out.)