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The U.S. central bank has lifted a restrictive asset cap on Wells Fargo that was imposed seven years ago due to its “fake accounts” scandal, allowing the bank to increase its lending and grow its operations.
Removing the $2 trillion limit marks a significant step for the fourth-largest U.S. bank by assets as it aims to move past the controversy that entailed the opening of millions of unauthorized customer accounts.
This decision, announced by the Federal Reserve on Tuesday, highlights a shift towards a more favorable regulatory environment for banks since Donald Trump’s presidential election win last year.
Wells Fargo has already paid over $5 billion in fines to regulators and those involved in class action lawsuits related to the scandal, where it was discovered that the bank had exaggerated its growth by pressuring employees to forge signatures, shuffle money into unauthorized accounts, and alter customer details without consent.
Charlie Scharf, the CEO of Wells Fargo, mentioned at a recent conference that lifting the cap would remove a significant hurdle for the bank’s leadership and strategy, which had made it “inwardly focused” in recent times.
“It affects our mindset regarding what we can concentrate on, and this stigma is now removed, placing us on par with other companies,” Scharf stated during the Bernstein conference in New York.
Since Scharf became CEO in 2019, part of a major restructuring, the bank has gradually lifted the regulatory constraints that stemmed from the fake account scandal that came to light in 2016.
In a statement on Tuesday, Scharf called the removal of the cap “a monumental achievement for the 215,000 Wells Fargo employees who played a role in this progress,” further noting that each employee will receive a $2,000 bonus.
The Federal Reserve’s choice to eliminate the asset limit removes the last significant limitation imposed on the bank, which had to keep its total assets below the 2017 figure of $1.95 trillion.
The central bank confirmed it had “determined that Wells Fargo has met all the conditions necessary for the removal of the growth restriction under the 2018 enforcement action.”
It also noted that this decision “reflects the considerable progress the bank has made in correcting its shortcomings.”
Other restrictions related to the fake accounts scandal will “stay in effect until the bank meets the criteria for their removal,” according to the Fed.
