What happened

Shares of banking name Wells Fargo (WFC -0.02%) lost another 4.8% of their value on Wednesday, adding to Tuesday's losses on the heels of news it could be subject to more fines linked to the account opening scandal first revealed in 2016.

So what

Bloomberg reported late Tuesday that the U.S. Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau have warned Wells Fargo that new sanctions may be in the works. Namely, the agencies are reportedly displeased with the slow pace at which the bank is making restitution with consumers impacted by unauthorized accounts opened in their name.

Person looking at a falling chart on a computer monitor.

Image source: Getty Images.

Such a decision would prove not only costly but embarrassing for CEO Charlie Scharf. In October 2019, he replaced former chief Tim Sloan (who replaced John Stumpf), largely to lead the cleanup effort following the revelation that millions of consumers may have been adversely impacted by the bank's sales inventive program that prompted bankers to open bank and credit card accounts for customers that did not want them.

Now what

Wednesday was actually day three of the stock's steep selling, most of which likely stemmed from worries of new penalties and fines; whispers of CFPB's threats may have begun to circulate as early as Monday, before Bloomberg's story posted. All told, shares are now down 12.7% since last Friday's close, and likely destined for more downside before making a bottom.

Be wary of assuming any pullback is a reflection of the bank's risk related to another round of sanctions, though.

Wells Fargo shares rallied 146% from November's lows to last month's highs, leaving the stock vulnerable to profit-taking. Investors simply needed an excuse to make such a move. Bloomberg provided it. Now that the ball is rolling as quickly as it is, it could be difficult to stop without a clear capitulation. Wednesday's bearish action was volatile and on high volume, but doesn't look like the final washout of any shareholders thinking about shedding their stakes.