Wells Fargo's embattled CEO John Stumpf is stepping down as the U.S.'s second-largest bank is roiled by a scandal over its sales practices.

The San Francisco bank said Wednesday that Stumpf is retiring effective immediately and also relinquishing his title as chairman. He won't be receiving severance pay and the bank announced earlier that he will forfeit $41 million US in stock awards.

Wells Fargo's chief operating officer, Tim Sloan, will succeed Stumpf as CEO and join the company's board. Sloan has been with Wells Fargo for 29 years. Stephen Sanger, the bank's lead director, will serve as the board's non-executive chairman.

Stumpf's end at Wells Fargo comes a little over a month after the bank was fined by California and federal regulators $185 million over its sales practices.

The regulators alleged employees trying to meet aggressive sales targets opened bank and credit card accounts, moved money between those accounts and even created fake email addresses to sign customers up for online banking — all without customer authorization. Debit cards were issued and activated, as well as PINs created, without customers' knowledge.

A customer walk into a Florida Wells Fargo bank. Wells Fargo has been fined $185 million US by regulators who said bank employees opened more than two million unauthorized deposit and credit card accounts to meet sales goals. (Lynne Sladky/AP)

"I wish I could snap my fingers and make everything all right again, but it's going to take time," said Sloan said in an interview. "We are going to make it right by our customers and we are going to work to win that trust back."

Stumpf, a 34-year veteran of the bank who took over as CEO in 2007, had previously gained acclaim for navigating Wells Fargo through the financial crisis and keeping it free of scandal. But he came under withering pressure over the alleged misconduct, believed to have gone on at the bank for years. Some 5,300 lower-level employees were fired.

"While I have been deeply committed and focused on managing the company through this period, I have decided it is best for the company that I step aside," he said in a prepared statement Wednesday.

Facing the Senate banking committee

Among Stumpf's critics, Democratic Senator Elizabeth Warren of Massachusetts told him at a Senate banking committee hearing last month that he should resign and "give back the money you took while the scam was going on."

News of Stumpf's departure, however, did little to quell some anger over the affair or their demands for information from the company on how harmed customers and employees will be made whole.

Senate banking committee chairman Richard Shelby, and the panel's senior Democrat, Sherrod Brown of Ohio, said Wednesday that Stumpf's retirement doesn't answer important questions.

A customer uses a Wells Fargo bank ATM in New York in September. Regulators alleged Wells Fargo employees also transferred customers' money into the unauthorized account, and even signed people up for online banking in a feverish drive to meet sales targets. (Patrick Sison/AP)

"We are still waiting for answers as to how Wells Fargo plans to right its wrongs against customers and the low-paid employees who weren't given the benefit of a retirement package when they were fired for refusing to cheat," Brown said in a statement.

Stumpf earned $19.3 million last year. But he and Carrie Tolstedt, the executive who ran the retail banking division, will forfeit millions.

Tolstedt announced in July that she would retire from the bank this year and had been expected to leave with as much as $125 million in salary, stock options and other compensation. She was stripped of $19 million of her stock awards, and her departure was made immediate.

The revelations have sparked investigations by federal agencies. The bank's independent directors have also launched their own investigation.

Wells Fargo is scheduled to report its quarterly results Friday morning. In after-hours trading, its stock rose 76 cents, or nearly 1.7 per cent, to $46.08.