Wells Fargo asset cap likely to be lifted next year, sources say
Wells in last stages of process to pass regulatory test to get asset cap lifted - sources
Asset cap put in place in 2018, limiting bank's growth
Fed may stall lifting the asset cap if there are concerns, or not satisfied with the progress
Adds Fed statement in paragraph 6
By Nupur Anand
NEW YORK, Nov 26 (Reuters) -Wells Fargo WFC.N is in the last stages of a process to pass regulatory tests to lift a $1.95 trillion asset cap next year after fixing problems from its fake accounts scandal, according to three sources familiar with the situation.
The punishment could be removed as early as the first half of 2025, one of the sources said. The three sources declined to be identified because the process is confidential.
The Federal Reserve imposed the asset cap in 2018 and ordered Wells Fargo to fix failings in its governance and risk management after years of consumer abuses.
The asset cap is seen as one of the toughest punishments that U.S. regulators can put in place, and its removal requires a vote by the Fed's board of governors.
While the sources said Wells Fargo had done all the work required to lift the cap, governors could still keep the punishment in place if they have concerns or are not fully satisfied with the fixes.
"The Federal Reserve has no timetable to lift the asset cap," a Fed spokesperson said in a statement late Tuesday.
Lifting the restrictions would be a major step forward for the bank's cleanup efforts. Since the scandal emerged in 2016, it has been fined billions of dollars and slapped with a raft of regulatory punishments, some of which are still in place.
Wells Fargo declined to comment. The Federal Reserve Bank of San Francisco, where the bank is headquartered, declined to comment.
The stock rose 3% in pre-market on the Reuters report, but pared some gains and was up 1.3% before market open.
Shares are expected to respond well on the report that the bank is at the end of this regulatory punishment, Scott Siefers, analyst at Piper Sandler said in a report.
As part of the compliance process, the bank sent a third-party review to the Fed to demonstrate it had overhauled its risk management and controls, Bloomberg News reported in September.
Wells Fargo faced a public outcry and intense scrutiny in the wake of what the Fed called "pervasive and persistent misconduct" that harmed consumers. Most recently, Democratic Senator Elizabeth Warren warned the Fed not to remove the cap until the bank had fixed its risk and compliance issues.
As Republican President-elect Donald Trump takes office, Wall Street bankers expect his administration to overhaul bank regulation and slash burdensome rules on capital and mergers.
Wells Fargo CEO Charlie Scharf said earlier this year that the asset cap is curtailing its ability to take in more corporate deposits and expand its trading business, where peers have grown.
The bank has managed its wholesale deposits and markets businesses carefully to comply with the cap, and those are areas that the company would expect to grow when the restrictions are lifted, Scharf told analysts in October.
"Beyond that, it's just normal growth opportunities that we would see across all different parts of the company," he added.
Rival banks have expanded while the cap was in place. JPMorgan Chase's JPM.N assets swelled by more than $1.5 trillion since the start of 2018, while Bank of America BAC.N and PNC Financial PNC.N added about $1 trillion and nearly $200 billion, respectively.
In February, the Office of the Comptroller of the Currency terminated a 2016 punishment, called a consent order, for the bank's harmful sales practices. The decision was seen as paving the way for the asset cap to be lifted.
Under the 2016 consent order, the bank was mandated to change the way it offered and sold products and services to consumers, and take additional actions to protect customers and employees.
A consent order is a formal, public enforcement action between a regulator and a bank, which often comes with a fine and orders to address an issue in a timely fashion.
The bank still has eight open consent orders. It has closed six since Scharf took the helm in 2019.
He has repeatedly said the regulatory work is the bank's top priority, and cited the closing of consent orders as signs of progress.
Reporting by Nupur Anand in New York, additional reporting by Pete Schroeder and Ann Saphir, editing by Lananh Nguyen, Marguerita Choy, Nick Zieminski and Himani Sarkar
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
