This story has been updated with statements from Wells Fargo CEO Charlie Scharf and Chair Steven Black.
The Federal Reserve announced Tuesday that it has lifted the
The victory also marks the summit in a series of regulatory wins for Wells CEO Charlie Scharf, who was brought on in 2019 to get the bank’s compliance on track.
“The Federal Reserve’s decision to lift the asset cap marks a pivotal milestone in our journey to transform
All of Wells’ full-time employees will receive a $2,000 award in connection with the compliance turnaround, Scharf added. Most of the workforce will get the bonus through a restricted stock grant.
The Federal Reserve Board, which voted unanimously in favor of lifting the cap, said in a statement that Wells has made “substantial progress” in addressing its corporate governance and firmwide risk management practices. It cited its own review of the bank’s efforts as well as a third-party evaluation.
While the most punitive part of the Fed’s 2018 enforcement action has been lifted, the order itself remains in place, which means that Wells will continue to receive enhanced scrutiny over its board oversight and risk management practices. In its statement, the Fed said
Fed Gov. Michael Barr, who served as the central bank’s vice chair for supervision from mid-2022 until this past January, said that Wells has made noticeable improvements, but has more work to do.
“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. “All three will need to continue for the firm to have a sustainable approach.”
The Fed’s sweeping lid on the bank’s growth — a novel enforcement measure at the time it was imposed — came in response to a slew of compliance violations at Wells. The Fed said in its enforcement action that the cap would remain in place “until [Wells] sufficiently improves its governance and controls.”
Until a few months ago, it seemed like progress was slow. The bank had chipped away at a handful of enforcement actions over the years, but
With each step forward, the expectation that Wells would soon see the light at the end of the tunnel rose.
In May, Scharf signaled that he was confident the Fed’s order would be lifted in the near future.
“We’re not done, but we’re a hell of a lot closer to the end than the beginning, at this point,” he said at an industry conference.
Scharf added that Wells was “a completely different company” in some ways from what it was when a spate of scandals brought it under regulators’ microscope. The Fed’s 2018 order pointed to “widespread consumer abuses and other compliance breakdowns” at the bank.
In a statement Tuesday, Steven Black, who’s been chair of Wells’ board since 2021, praised what he called Scharf’s “inspired leadership.” Black said the CEO has been “instrumental” in overseeing the company’s transformation.
In his own statement, Scharf said Wells has been “methodically investing in the company’s future while improving our financial results and profile.”
Over the last 15 years, the Fed, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau hit the megabank with various enforcement actions, calling out problems with its mortgage practices, student loan servicing, anti-money-laundering controls and home loss mitigation operations.
But the most impactful violation was the discovery that Wells employees had opened large numbers of unauthorized credit cards and checking accounts without customers’ authorization.
Since 2016, when the fake-accounts scandal burst open, the bank has paid more than $5 billion in penalties, settlements and consumer redress for its compliance blunders. Scharf said in May that Wells has been spending $2 billion annually on its risk and control agenda.
While Wells was operating under the asset cap, Bank of America and Citigroup both increased their total assets by 44%. JPMorgan Chase saw its assets go up by 76%.
In May, Scharf said that when the asset cap eventually got lifted, Wells wouldn’t suddenly start growing exponentially. But certain lines of business, like commercial deposit-taking and corporate investment banking services, would be able to burgeon.
“We will expand the company in a very controlled way, in a way that is within the same kind of risk tolerances that we’ve had, which will grow linearly over time, not exponentially,” Scharf said at the time.
He added that the bank would also be able to start using its balance sheet differently to drive certain offerings, like private credit.