By: Ken Chase
Late last month, the U.S. Office of the Comptroller of the Currency announced that a 2015 regulatory enforcement consent order against Wells Fargo had been terminated in December 2021. Last year saw the company freed from three major 2014 and 2015 enforcement orders, related to issues that included unfair billing practices, money laundering controls, and retail sales practices.
A 2018 Federal Reserve asset cap on Wells Fargo remains in effect, however, preventing the bank from increasing its asset balance sheet beyond $1.95 trillion. That enforcement action was put in place to force the company to overhaul its regulatory infrastructure and internal controls in the wake of a customer accounts scandal.
In early 2021, Bloomberg reported that the company’s plan to overhaul its governance and risk management policies was approved by the Federal Reserve. While that approval was widely regarded as an important step on the path the ending the asset cap, Fed Chair Jerome Powell suggested in September of that year that the company had more work to do before the cap would be removed. “We’re not going to remove that cap until that’s done,” he noted.
A 2021 Reuters report suggested that the asset cap limited Wells Fargo’s ability to make the loans needed to ensure that the company’s growth keeps pace with its competitors. However, Wells Fargo CFO Mike Santomassimo addressed that concern in the company’s Q4 2021 earnings call when he asserted that, “the constraint for us on the asset cap is really on the deposit side.”
“On the loan side, we’re not constrained on growth on the loan side so we still have plenty of room to continue to grow with our clients,” he added.
Meanwhile, data suggests that the company’s lending volume dropped significantly in 2021, despite a 5 percent increase in lending in the second half of the year. Over the same period, the bank’s total assets remained flat. Experts have noted that Wells Fargo’s inability to expand its loan book, even with the asset cap in place, represents a significant challenge for the future.