Unprecedented growth restrictions imposed on Wells Fargo will stay in place until the Federal Reserve’s board agrees the bank has made enough progress in fixing flaws that led to customer-abuse scandals over the past two years, Fed Chairman Jerome Powell said in a letter to U.S. Sen. Elizabeth Warren.
In a letter to Warren dated May 10, Powell agreed to deviate from the terms of the regulator’s February order that said the limits would be lifted once Wells Fargo satisfied the Federal Reserve Bank of San Francisco and the Fed staff’s head of supervision. The senator had pressed the central bank chief to make that change at a March hearing and in an April letter.
The Fed’s order blocked Wells Fargo from increasing assets until it creates a credible plan to fix internal controls that allowed the company to open accounts without customer approval, force unwanted car insurance on borrowers and charge mortgage customers improper fees.
“The firm must make significant progress in remedying its oversight and compliance and operational risk management deficiencies before relief from the asset growth restriction would be forthcoming,” Powell wrote to Warren, a Massachusetts Democrat who is among Wall Street’s loudest critics. He said the Fed also will consider the senator’s request to make public parts of an independent review required by the order.
Wells Fargo, after receiving feedback from the Fed, is “making plans to operate under the asset cap through the first part of 2019,” Chief Executive Officer Tim Sloan said Thursday.
Randal Quarles, the Fed’s vice chairman for supervision, has voluntarily recused himself from decisions about Wells Fargo, citing family ties to the bank. Any board decisions about the bank must currently be made by Powell and Governor Lael Brainard.
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