The Federal Reserve announced on Wednesday that Wells Fargo will no longer be subject to the $1.95 trillion asset cap imposed in 2018. Regulators first set this limit after a federal investigation revealed widespread consumer abuses and a 2016 fake-accounts scandal at the bank. Under the 2018 consent order, Wells Fargo’s assets could not exceed $1.95 trillion as of year-end 2017 unless the Fed required otherwise.
CEO Charles Scharf’s Reaction
Charles Scharf, who became CEO in 2019, called the Fed’s decision a “critical milestone” in the bank’s transformation. When he took the top job, he said his first priority was to address the problems left by his predecessor. In a press release, Scharf said Wells Fargo is now a “different and stronger company” because of the changes made under his leadership.
Impact on Stock and Growth Strategy
Wells Fargo shares jumped as much as 4% in after-hours trading on the news. Under Scharf’s tenure, the stock has gained over 50%. Removing the cap will allow Wells Fargo to expand its balance sheet and compete more directly with Wall Street giants like Goldman Sachs, JPMorgan Chase, and Morgan Stanley. Scharf aims to build Wells Fargo into a major investment bank, a move that was harder to pursue under the asset cap.
Progress Under Consent Orders
The Fed noted that lifting the cap reflects “substantial progress” in correcting past deficiencies. Since 2019, Scharf has fulfilled 13 consent orders issued by regulators. Seven of those orders have been lifted this year. However, some provisions of the 2018 enforcement action remain in place until the bank meets all termination conditions.
Remaining Regulatory Oversight
Even with the asset cap lifted, Wells Fargo still faces other regulatory restrictions. The bank remains under the 2018 Fed consent order for certain operational issues. It also has a separate agreement with the U.S. Office of the Comptroller of the Currency (OCC) regarding violations of the Gramm-Leach-Bliley Act. In addition, an OCC agreement from last year cited deficiencies in Wells Fargo’s anti-money laundering controls.
Federal Reserve Governor Michael Barr, who oversaw the bank regulation division, said regulators will continue rigorous supervision. He stated that strong management, board oversight, and Fed supervision must continue to ensure Wells Fargo’s sustainable development.
Analyst Caution and Future Expectations
While lifting the asset cap removes a major constraint, analysts warn that Wells Fargo should not expect an immediate boost in earnings. In March 2024, UBS Chief Financial Officer Mike Santomassimo reminded investors that the bank’s turnaround would not be sudden. He said the removal of the cap “is not this sudden turnaround moment.”
Wells Fargo’s management team has echoed that caution. They have downplayed expectations for a quick profit surge, noting that other restrictions and ongoing compliance work will still limit growth. Despite these caveats, removing the cap is a key step toward restoring Wells Fargo’s standing among large banks.
