Wells Fargo Bank received a reprieve Wednesday – if perhaps temporarily – from growth restrictions placed on it by federal regulators in 2018, due to “extraordinary disruptions from the coronavirus.”
In a release, the Federal Reserve said the growth restriction was removed so that the bank “can provide additional support to small businesses.” The Fed said change in the bank’s regulatory restrictions will only allow the firm to make additional small business loans as part of the Paycheck Protection Program, or PPP, and the Federal Reserve’s forthcoming Main Street Lending Program.
The restrictions were placed on the bank, the Fed said in 2018, following widespread consumer abuses and compliance breakdowns by the bank.
In addition to a limitation on its growth (which essentially capped the bank’s assets at 2017 levels), the bank was forced to remove three of its board members and name a new, fourth member.
“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,” said outgoing Federal Reserve Board Chair Janet L. Yellen at the time the sanctions were announced. “The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers.”
In Wednesday’s announcement, the Fed said that the bank will be required to transfer benefits from the PPP and the Main Street Lending Program to the U.S. Treasury or to non-profit organizations approved by the Fed that support small businesses. The change will be in place as long as the facilities are active, the Fed said.
The Fed was clear that allowing the bank to participate in the small business lending programs did not absolve the bank of past issues. “The changes do not otherwise modify the Board’s February 2018 enforcement action against Wells Fargo,” the Fed said. “The Board continues to hold the company accountable for successfully addressing the widespread breakdowns that resulted in harm to consumers identified as part of that action and for completing the requirements of the agreement.”