A pedestrian wearing a protective mask passes a bank branch at Wells Fargo & Co. in New York, USA, on Thursday, July 9, 2020.
Peter Foley | Bloomberg | Getty Images
Wells Fargo’s stock erupted on Wednesday after the Federal Reserve allegedly signaled it would accept the company’s plan to overhaul its governance functions, a key step in the bank’s effort to get rid of a regulatory constraint.
Wells Fargo rose 5.7% in trading.
The Fed signaled in particular that it would accept the bank’s proposal, Bloomberg said, which removes an obstacle in the eventual removal of an asset limit imposed on the bank in February 2018.
However, several steps remain before the penalty is lifted: Wells Fargo, headed by CEO Charlie Scharf since October 2019, has to implement his plan at the Fed’s liking, so get his controls approved by an outside party before the Fed votes to suspend the cap.
Wells Fargo is limited to the size of the balance sheet it had at the end of 2017, at $ 1.95 trillion, a rare penalty in the banking world decreed by the Fed after the multitude of bank scandals linked to internal controls.
This asset cap was one of the main reasons why Wells Fargo underperformed its rivals, including JPMorgan Chase and Bank of America, who were better able to seize opportunities during the pandemic.
A bank spokesman declined to comment specifically on the news and referred reporters to a statement he made in the past:
“The Federal Reserve will determine when work to fulfill the requirements of the consent request will be done to your satisfaction,” said the bank. “We are focused on getting the job done. We maintain strong levels of liquidity and capital, and we are committed to using our financial strength to help support the United States economy and our customers, while operating in compliance with the asset cap. . “