Wells Fargo's latest regulatory rebuke may prolong asset cap punishment, analysts say
New throughout
By Manya Saini and Nupur Anand
Sept 13 (Reuters) -Wells Fargo's WFC.N latest regulatory rebuke for insufficient efforts to combat money laundering will probably prolong another ongoing major regulatory punishment that has limited growth at the bank, analysts said.
Despite some progress fixing issues from a 2016 fake accounts scandal, the fresh compliance problems signal Wells Fargo's cleanup efforts may be far from over, and as such the period the bank must stay under an asset cap imposed by the U.S. Federal Reserve is now likely to be extended.
The Office of the Comptroller of the Currency said on Thursday it was putting restrictions on Wells Fargo's ability to expand into risky businesses after it found the bank had insufficient safeguards against money laundering and other illegal transactions.
"This is very surprising given that Wells Fargo had resolved a consent order for anti-money laundering quite recently, in January 2021, after many years of work and expense," Vivek Juneja, an analyst at JPMorgan Securities, wrote in a note.
The order says Wells Fargo will need approval from the OCC to introduce riskier new products or services, as well as providing risk assessment plans even for less risky offerings and a detailed action plan. It did not fine the bank.
"We have been working to address a substantial portion of what's required in the formal agreement, and we are committed to completing the work with the same sense of urgency as our other regulatory commitments," the bank said in a statement on Thursday.
Wells Fargo operates under a $1.95 trillion asset cap that prevents it from growing until regulators deem it has fixed problems dating back to the fake accounts scandal. It still has eight regulatory punishments, called consent orders, that it is working to address.
Fed Chair Jerome Powell said in 2021 that the asset cap would stay in place until the firm had comprehensively fixed its problems. The Fed has not spoken publicly on Wells Fargo's asset cap since then.
"Although an enforcement action against a bank for anti-monetary laundering policies and procedures is unfortunately not that uncommon, it is unique for Wells," KBW analysts led by David Konrad wrote in a note. "It adds uncertainties to the timeline of the asset cap and their expense outlook."
In a regulatory filing last month, the bank had said it was being investigated by government authorities over issues related to anti-money laundering and sanctions programs, which Juneja from JPMorgan said could mean other agencies also taking action.
The 2016 fake accounts scandal led to heightened scrutiny, billions of dollars in penalties, and multiple shareholder lawsuits against the bank, with regulators mandating more oversight.
In February, the OCC lifted a 2016 consent order on the bank's sales practices. At the time, analysts said the move could pave the way for the Fed to lift its consent order as early as this year.
Thursday's knock from regulators is "an unfortunate but not shocking step back in what had otherwise been good forward progress this year on resolving regulatory concerns," Piper Sandler analysts wrote in a report this week.
For other analysts, the outlook for Wells Fargo's regulatory cleanup is still murky.
"We still do not have a clear view of when asset-cap removal would come in any event, much less if additional actions like today's could alter the path further," Jefferies said.
CEO Charlie Scharf has been working to contain the fallout and help resolve the consent orders since he took the top job in 2019.
The asset cap is curtailing Wells Fargo's ability to take in more corporate deposits and expand its trading business, two potential growth areas for the bank, Scharf said earlier this year.
Wells Fargo's stock has risen nearly 7% this year, lagging a 15% jump in a broader S&P 500 bank index .SPXBK.
Reporting by Manya Saini in Bengaluru and Nupur Anand in New York; Editing by Arun Koyyur and Rosalba O'Brien
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
