Feb 2, 2023
Wells Fargo Hoped Fed Sanction Would Be Brief. Today It Turns 5
(Bloomberg) -- When regulators hit Wells Fargo & Co. with an unprecedented cap on growth, executives atop the bank expressed confidence they could get it lifted in a year or so. Today marks its fifth birthday.
The unexpectedly sticky cap on assets has become the industry’s most-dreaded punishment. Janet Yellen made it her final act as Federal Reserve chair in early 2018 — a moment that’s been compared to the final scene of The Godfather. Wells Fargo can’t escape until it completes a grueling internal overhaul to address past scandals.
Meanwhile, the measure has halted the San Francisco-based bank’s once-envied rise, which had continued through the financial crisis, leaving it with almost $2 trillion in assets on its balance sheet. Since the cap took effect, Wells Fargo’s biggest rivals have piled up an additional $2.5 trillion onto theirs.
When will it end?
Chief Executive Officer Charlie Scharf, enlisted in 2019 to address the scandals, has abandoned his predecessor’s habit of offering forecasts for lifting the cap. When the subject arises, Scharf emphasizes that his top priority is satisfying regulators and that much work remains.
The order implementing the cap requires executives to draft plans for improvements and win the Fed’s approval. But the firm has to finish enacting them to clear a third-party review. After that, the Fed board will have to agree to end the sanction, potentially under scrutiny from lawmakers who’ve made Wells Fargo a favored target for criticism.
“We are a different company today and we’ve made significant progress on delivering a better customer experience, innovating our products and services, and continuing to focus on improving our risk and controls,” a Wells Fargo spokesperson said in a statement. “We know there is more work to do and we are confident that we now have the right people and plans in place to transform this company.”
--With assistance from Heather Smith.
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