The asset cap imposed on Wells Fargo Bank will remain in place, the chairman of the Federal Reserve Board said Wednesday, until the bank satisfies the Fed it has taken action to correct the environment that caused “significant consumer abuses.”
Federal Reserve Board Chairman Jerome H. (“Jay”) Powell, in a press conference following the end of the meeting of the Fed’s rate-setting Federal Open Market Committee (FOMC), that the imposition of the asset cap came after a “remarkably widespread series of breakdowns” that occurred in the bank’s risk-management apparatus, resulting in “significant consumer abuses.”
In February 2018, the Fed imposed a limit on the bank’s growth, as well as removal of some of its directors. The sanctions were imposed then because of “recent and widespread consumer abuses and other compliance breakdowns” at the bank. “We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again,” Chair Janet L. Yellen said then.
At that time, the Fed said sanctions on the firm’s growth would continue until the bank “sufficiently improves its governance and controls.” The order did not require Wells Fargo to cease current activities, including accepting customer deposits or making consumer loans, the Federal Reserve said in a release.
Powell gave no indication that the Fed was ready to lift the asset growth cap, which he called an “unprecedented sanction.”
“We will not lift that until Wells Fargo gets its arms around this, comes forward with plans, implements those plans and we’re satisfied with what they’ve done.
“That’s not where we are right now,” Powell said.