Editor’s note: This story is developing and will be updated.
The Federal Reserve has lifted the asset cap that Wells Fargo has operated under since 2018, determining that the lender has met all conditions required for the growth restriction’s removal, according to a news release Tuesday.
The $1.95 trillion asset cap was tied to a 2018 enforcement action against the bank, “responding to widespread consumer abuses and compliance breakdowns.” The bank was ordered to improve its governance and risk management program in the wake of the lender’s 2016 fake-accounts scandal.
The bank also had to obtain a third-party review of its improvements for the cap to be removed. Additionally, the Fed said it completed its own assessment of the bank’s corporate governance and firmwide risk management programs.
The San Francisco Fed, with the review of the director of the division of supervision and regulation, conducted numerous supervisory activities to assess the bank’s progress, said the order, dated May 30. Based on their recommendation, the Fed’s board determined the asset cap be removed.
“The removal of the growth restriction reflects the substantial progress the bank has made in addressing its deficiencies and that the bank has fulfilled the conditions required for removal of the growth restriction,” the Fed said in its release. “The other provisions in the 2018 enforcement action will remain in place until the bank satisfies the requirements for their termination.”
Fed Gov. Michael Barr, who until recently was the central bank’s vice chair for supervision, issued his own statement accompanying the news.
“Removal of the asset cap represents successful remediation to the required standard based on focused management leadership, strong board oversight, and strict supervision holding the firm accountable,” Barr said in the statement. “All three will need to continue for the firm to have a sustainable approach.”
Wells CEO Charlie Scharf said the decision “marks a pivotal milestone in our journey to transform Wells Fargo.”
“We are a different and far stronger company today because of the work we’ve done,” he said in a statement Tuesday. “In addition, we have changed and simplified our business mix, and we have transformed the management team and how we run the company. We have been methodically investing in the company’s future while improving our financial results and profile. We are excited to continue to move forward with plans to further increase returns and growth in a deliberate manner supported by the processes and cultural changes we have made.”
The bank’s board chair, Steven Black, noted “the substantial changes we have made to board composition and oversight,” and credited Scharf with his leadership in overseeing the transformation.
The bank will give all full-time employees of Wells Fargo a special $2,000 award “as a demonstration of our appreciation for what we have accomplished together,” Scharf said.
