A pedestrian wearing a protective mask walks past a Wells Fargo & Co. bank branch on Thursday, July 9, 2020. in New York, USA.
Peter Foley | Bloomberg | Getty Images
Wells Fargo stock plunged Wednesday after the Federal Reserve reportedly announced it will accept the company’s plan to overhaul its board positions, a major step in the bank’s efforts to be exempt from a legal restriction.
Wells Fargo climbed 5.7% while trading.
The Fed has indicated privately that it would accept the bank’s proposal, Bloomberg reported, which removes a hurdle in eventually removing an asset restriction imposed on the bank in February 2018.
However, there are still several steps to take before the fine is lifted: Wells Fargo, led by CEO Charlie Scharf since October 2019, must execute its plan at the Fed’s discretion and then have its controls approved by an outside party before the Fed will vote to to lift. the cap.
Wells Fargo is limited to the balance sheet size it had at the end of 2017, which is $ 1.95 trillion, a rare banking fine imposed by the Fed following the bank’s many scandals related to internal controls.
That asset constraint was a major reason why Wells Fargo underperformed rivals, including JPMorgan Chase and Bank of America, which were better able to capitalize on opportunities during the pandemic.
A spokesperson for the bank specifically declined to comment on the news, referring reporters to a statement it has made in the past:
“The Federal Reserve will determine when the work to meet the requirements of the consent warrant is performed satisfactorily,” the bank said. “We are focused on doing the job. We maintain high levels of liquidity and capital, and we are committed to using our financial strength to support the US economy and our clients while trading in line with the asset constraint.”