Fed won't lift Wells' growth cap until deficiencies are fixed: Powell
WASHINGTON — The Federal Reserve will not lift the asset cap imposed on Wells Fargo until the bank addresses deficiencies in board oversight and its risk management program, Fed Chairman Jerome Powell said in a letter to Congress last month.
“What happened at Wells Fargo was outrageous. The underlying problem at the firm was a strategy that prioritized growth without ensuring that risks were managed, and as a result the firm harmed many of its customers,” Powell said in the letter dated Nov. 28 to Sen. Elizabeth Warren, D-Mass.
In February, the Fed imposed the cap on Wells Fargo’s growth to address risk management deficiencies that came to light as a result of the bank's phony-accounts scandal. The Fed issued the order right before the departure of former Fed Chair Janet Yellen.
“We do not intend to lift the asset cap until remedies to these issues have been adopted and implemented to our satisfaction,” Powell wrote in the letter to Warren.
The letter, which was first reported by Reuters on Monday, came after Warren asked the Fed in October not to remove the asset growth restriction until Wells Fargo CEO Tim Sloan is replaced.
Powell, in his letter to Warren, said the decision on whether Wells Fargo's asset growth cap will be lifted will be determined by a Fed board vote.
“The Federal Reserve is actively engaged in reviewing Wells Fargo’s progress in meeting the requirements of the Order and in ensuring that the firm comprehensively addresses the deficiencies identified in the Order,” Powell said.
Wells Fargo has been embroiled in controversy since 2016, after it came to light that millions of fake accounts were opened in customers’ names without their permission.
The Fed's consent order limiting Wells Fargo’s asset growth requires the bank to notify the Fed that its remediation plans are acceptable, adopted and implemented, and it requires an independent review of the improvements in risk management and oversight by an “acceptable third party.”
The troubled bank has also been under scrutiny for forcing customers into auto insurance they didn’t need, which led to roughly 20,000 customers having their cars seized. And in August, the bank disclosed a software error that miscalculated eligibility for mortgage loan adjustments, leading to roughly 400 customers losing their homes to foreclosure.