Federal Reserve ends scandal-era restriction on Wells Fargo
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Wells Fargo is shedding the last major link to the fake accounts scandal that dogged the bank: the Federal Reserve on Tuesday said that it would no longer cap how much the institution could grow.
Why it matters: For the first time in seven years, Wells Fargo is free to expand its business — take in more deposits, lend more to businesses and make acquisitions — in ways that might help it better compete on Wall Street.
What they're saying: "The removal of the growth restriction reflects the substantial progress the bank has made in addressing its deficiencies," said the Fed, which regulates the bank, in a statement.
Flashback: The Fed imposed a $2 trillion asset cap on Wells Fargo in 2018 — the most painful regulatory punishment imposed in the aftermath of the bank's fake accounts scandal.
- The scandal was the company's biggest in its century-old history: employees opened millions of fake accounts on behalf of consumers who did not authorize them to do so.
Zoom in: An aggressive internal sales culture put pressure on employees. "Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts," the Consumer Financial Protection Bureau said in 2016.
- The CFPB was the first federal agency to take crack down on the bank after Los Angeles filed a suit alleging the wrongdoing in 2015.
- Years of other scandals, record fines, congressional hearings and a criminal investigation followed.
State of play: Wells Fargo said the removal of the asset cap was "a pivotal milestone" in its transformation.
- "We are a different and far stronger company today because of the work we've done," said Charlie Scharf, the bank's third CEO since the height of the scandal, in a statement.
- "We are excited to continue to move forward with plans to further increase returns and growth in a deliberate manner supported by the processes and cultural changes we have made," Scharf said, adding full-time employees would receive $2,000 bonuses.
