Fed caps growth at Wells Fargo over sham accounts, other consumer abuses.
By James Rufus Koren
Feb 02, 2018 | 5:25 PM
The Federal Reserve ordered Wells Fargo & Co. on Friday to cap its growth and improve its corporate governance, punishment for what the regulator called “widespread consumer abuses and other compliance breakdowns” at the San Francisco financial giant.
The bank, apparently in response to the action, said it would replace four board members. Fed Chairwoman Janet Yellen said Wells Fargo will not be allowed to grow any larger until it can do so without endangering customers.
“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 Yellen, whose term as chairwoman ends Saturday.
The Fed ordered the bank to submit a plan for improving board oversight and risk management. Until the Fed judges that the bank’s practices have improved, the bank cannot increase its total assets beyond $1.95 trillion, where they stood at the end of 2017.
In a statement, Wells Fargo Chief Executive Timothy Sloan said the bank is “focused on addressing all of the Federal Reserve’s concerns.” On a Friday afternoon conference call with investors, he said Fed leaders “believe there is more work that needs to be done, and we agree.”
The Fed’s move is the latest and most serious regulatory action taken against the bank over the last year and a half.
In September 2016, the bank agreed to pay $185 million to regulators for opening accounts for customers without their authorization, a practice first reported by the Los Angeles Times in 2013.
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