A pedestrian wearing a protective mask walks past a Wells Fargo & Co. bank branch in New York, U.S., on Thursday, July 9, 2020.
Peter Foley | Bloomberg | Getty Images
Wells Fargo shares popped more than 4% Wednesday after the Federal Reserve reportedly signaled it will accept the bank’s plan to overhaul its governance functions, a key step for releasing the maligned firm from a regulatory restriction.
The Fed has privately indicated it would accept the bank’s proposal, Bloomberg News reported. This would bring Wells closer to having limits on its assets removed. Wells’ assets under management have been capped since February 2018.
However, several steps remain before the penalty is lifted. Wells Fargo — run by CEO Charlie Scharf since October 2019 — has to implement its plan to the Fed’s liking, then get its controls approved by an outside party before the central bank votes to lift the cap.
Wells Fargo is limited to the balance-sheet size it had in late 2017, at $1.95 trillion, a rare penalty in the banking world enacted by the Fed after the firm’s multitude of scandals tied to internal controls.
That asset cap has been a key reason why Wells has underperformed rivals such as JPMorgan Chase and Bank of America, which have been more able to take advantage of opportunities during the pandemic.
A spokesman for the bank declined to comment specifically to the news and referred reporters to a statement it has made in the past:
“The Federal Reserve will determine when the work to fulfill the requirements of the consent order is done to their satisfaction,” the bank said. “We are focused on doing the work. We maintain strong levels of liquidity and capital, and we are committed to using our financial strength to help support the U.S. economy and our clients while operating in compliance with the asset cap.”