- The Federal Reserve lifted the $1.95 trillion asset cap on Wells Fargo, imposed in 2018 due to various scandals.
- This decision allows Wells Fargo, once the Des Moines metro’s largest employer, to pursue growth, and marks a significant victory for CEO Charlie Scharf.
- Wells Fargo employees will receive a $2,000 bonus to commemorate the lifting of the asset cap.
WASHINGTON — Wells Fargo has been released from a punitive, seven-year, $1.95 trillion cap on its assets after the U.S. Federal Reserve lifted the regulatory measure, allowing the bank to pursue unimpeded growth.
The move on Tuesday, June 3, hands a major victory to CEO Charlie Scharf, who has been cleaning up the bank since taking the top job in 2019. It also sent Wells Fargo’s shares up more than 2% as investors anticipated that the company could now expand.
Scharf announced all full-time bank employees will receive a $2,000 award to commemorate the accomplishment.
Once the Des Moines metro’s largest employer, the San Francisco-based bank has steadily pared back its workforce since 2022, laying off more than 1,200 workers.
The removal of the cap “will be a significant bump for the stock in the near term and also paves the way for long-term growth as they don’t have to manage their business around the asset cap now,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.
The Fed imposed the unprecedented restriction in 2018 following years of high-profile missteps at the bank, including a far-ranging scandal in which employees opened millions of unauthorized accounts for customers.
But the Fed said in a statement that Wells Fargo had made “substantial progress” in addressing its deficiencies, including improving its governance and risk-management programs and completing a third-party review of its overhaul.
The Fed board voted unanimously to lift the restriction, which was the first time the central bank had directly ordered a bank to stop growing in order to address widespread shortcomings.
‘We are a different and far stronger company today’
The decision is a major step in the bank’s longstanding efforts to repair the damage from the scandals that erupted in 2016, drawing public criticism and billions of dollars in fines.
Scharf called the move a “pivotal milestone” in the bank’s transformation.
“We are a different and far stronger company today because of the work we’ve done,” he said in a statement.
While the bank still faces some additional oversight from the Fed as part of the 2018 order, the removal of the asset cap marks a major shift for the nation’s fourth-largest lender, after the scandals ousted multiple executives as regulators piled fines and restrictions on the bank for its wrongdoing.
The bank came under regulatory scrutiny for years after scandal revealed it also charged unnecessary mortgage fees and forced drivers to buy car insurance they did not need, often to meet sales goals.
It paid billions in penalties and was also slapped with lawsuits from customers and shareholders. Before Scharf was hired as CEO, two former chief executives left in the wake of the controversy.
Wells Fargo became a major focus of criticism in Washington as well, with numerous lawmakers calling for executives to be removed and for the bank possibly to be broken up.
The lender cleared numerous consent orders this year, and over a dozen since 2019.
Regulators impose consent orders, or public enforcement actions that are often accompanied by fines. The orders instruct banks to fix problems in a timely way.
Scharf said last year the asset cap was curtailing Wells Fargo’s ability to take in more corporate deposits and expand its trading business at a time when peers have grown.
It has been managing its wholesale deposits and markets businesses carefully to comply with the cap, and those are areas it would expect to expand when the restrictions are lifted, Scharf told analysts in October.
Here is an overview of Wells Fargo’s years-long effort to address its regulatory woes:
September 2016
- The bank agreed to pay $185 million in penalties and $5 million to customers that regulators said were pushed into fee-generating accounts they never requested. The Consumer Financial Protection Bureau received $100 million of the total penalties — the largest fine ever levied by the federal agency at the time. Los Angeles officials and the Office of the Comptroller of the Currency were also party to the settlement.
- CEO John Stumpf appeared before the Senate Banking Committee. Later that month, the bank said it would eliminate sales goals for its retail banking business sooner than planned.
- Wells Fargo said Stumpf would forfeit equity awards worth about $41 million and not get a salary while the company’s board investigated its sales practices.
October 2016
February 2017
- The lender said it fired four mid-level executives and stripped them of bonuses and stock awards as a result of an investigation into improper sales practices in its retail bank.
March 2017
- Wells Fargo said eight senior executives, including CEO Sloan and finance chief John Shrewsberry, would not receive cash bonuses for 2016.
July 2017
- Federal Reserve Chair Janet Yellen said the central bank was prepared to act against the directors of Wells Fargo if an investigation deemed it appropriate.
August 2017
- Wells Fargo hiked the tally of accounts that were potentially opened without customers’ knowledge by over a million after an expanded review of improper sales practices.
February 2018
- The Fed imposed an asset cap of $1.95 trillion on the bank “until it sufficiently improves its governance and controls.”
May 2019
- CEO Tim Sloan resigned, becoming the second CEO to leave the bank in the fallout of the sales practices scandal.
September 2019
- After a difficult, months-long search for a new CEO, the bank named Charles Scharf as its next leader.
January 2020
- The OCC announced civil charges against five former senior bank executives and settlements of charges with three other senior bank officials, including former CEO John Stumpf. He agreed to pay a $17.5 million penalty and a prohibition from the banking industry, while Carrie Tolstedt, the former community banking head, faced a fine of $25 million and an industry ban.
February 2020
- The lender agreed to pay $3 billion to resolve criminal and civil probes into fraudulent sales practices and admitted to pressuring employees in a fake-accounts scandal.
April 2020
- The Fed said it would “temporarily and narrowly” modify the growth restriction, allowing the bank to offer more loans under government assistance programs for small businesses hurt in the pandemic.
July 2020
- Wells Fargo said Mike Santomassimo would replace John Shrewsberry as chief financial officer.
February 2021
- Fed officials privately signaled that they had accepted the bank’s proposal for overhauling risk management and governance, Bloomberg News reported.
September 2021
- Fed Chair Jerome Powell said the central bank was closely monitoring efforts to fix Wells Fargo’s “widespread and pervasive” problems, and would take appropriate actions if the bank failed to do so.
December 2022
- The U.S. Consumer Financial Protection Bureau hit Wells Fargo with the regulator’s largest-ever civil penalty as part of a $3.7 billion agreement to settle charges over widespread mismanagement of car loans, mortgages and bank accounts.
September 2023
- Carrie Tolstedt, former head of Wells Fargo’s retail bank avoided prison time after pleading guilty to an obstruction charge related to the fake-accounts scandal.
February 2024
- U.S. Office of the Comptroller of the Currency terminated a 2016 punishment over sales practices.
May 2024
- Wells Fargo CEO said the asset cap imposed on the bank by regulators was curtailing its ability to take in more corporate deposits and expand its trading business.
September 2024
- A U.S. banking regulator found Wells Fargo’s safeguards against money laundering and other illegal transactions were too lax and restricted its ability to expand in risky businesses.
- The bank sent a third-party review of its risk and control overhauls to the Federal Reserve as it looked to remove an asset cap imposed by the regulator, Bloomberg News reported, citing sources.
November 2024
- Wells Fargo was in the last stages of regulatory tests to lift the asset cap in 2025, Reuters reported.
- The Fed must not remove Wells Fargo’s asset cap until the bank has fixed its risk management and compliance issues, top Democratic Senator Elizabeth Warren told the U.S. central bank.
December 2024
- CEO Scharf expressed more confidence in the bank’s progress to fix compliance problems, detailing its efforts to implement risk controls.
January 2025
- A top U.S. consumer watchdog terminated a 2022 order punishing the lender for allegedly mishandling auto loans and mortgages.
February 2025
March 2025
- The OCC terminated a 2021 consent order against the lender for deficiencies in its home lending loss mitigation practices.
April 2025
- The CFPB lifted a 2018 consent order related to the lender’s compliance risk management.
May 2025
- The OCC terminated a 2015 consent order related to the lender’s previously held financial subsidiaries.
- The U.S. Federal Reserve announced that Wells Fargo will no longer have to operate under a $1.95 trillion asset cap.
Sources: Company statements, Reuters and media reports, regulatory filings
Source: desmoinesregister.com
