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 Wednesday after the Federal Reserve reportedly signaled that it will accept the firm’s plan to overhaul its governance functions, a key step for the bank’s effort to be released from a regulatory restriction.
Wells Fargo climbed 5.7% in trading.
The Fed has privately signaled that it would accept the bank’s proposal, Bloomberg reported, which removes a hurdle in eventually removing an asset cap imposed on the bank in Feb. 2018.
However, several steps remain before the penalty is lifted: Wells Fargo, run by CEO Charlie Scharf since Oct. 2019, has to implement its plan to the Fed’s liking, then get its controls approved by an outside party before the Fed will vote 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 bank’s multitude of scandals tied to internal controls.
That asset cap has been a key reason that Wells Fargo has underperformed rivals including 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.”
