Citing widespread consumer abuses and compliance breakdowns, the Federal Reserve Board (Fed) announced last week that it would restrict the growth of Wells Fargo until it improves its governance and controls.
Wells Fargo was hit with a $185 million fine by the Consumer Financial Protection Bureau in September 2016 for abuses, including creating millions of consumer accounts that may not have been authorized.
Until it makes improvements, Wells Fargo will be restricted from growing any larger than its total asset size as of the end of 2017. Toward that end, Wells Fargo will replace three current board members by April and a fourth board member by the end of the year.
“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,” Fed Chair Janet Yellen said last week. “The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers.”
It was the last action Yellen oversaw as Fed Chair. She was not reappointed to another term by President Donald Trump. Jerome Powell was sworn in as Fed Chair on Monday.
The Independent Community Bankers of America (ICBA) applauded the Fed’s action against Wells Fargo.
“ICBA commends the Federal Reserve and former Chair Janet Yellen for heeding the community banking industry’s repeated calls for equitable treatment of Wells Fargo following the megabank’s repeated consumer abuses,” ICBA President and CEO Camden Fine said. “Following ICBA’s calls last year to replace the Wells Fargo board and senior management, the newly announced restrictions on its growth, the removal of four board members, and the required improvements to its governance and risk management controls will help protect consumers from future mistreatment.”
Fine said regulators must continue to ensure that banks are held accountable for illegal actions.
“Had the Wells Fargo scandal taken place at a community bank, the board and senior managers would have been removed months ago and would be facing prosecution. All banks, regardless of size, should always be held equally accountable for misconduct,” Fine said. “The wrongdoing at Wells Fargo and other systemically risky financial institutions has tarred the good reputations of thousands of community banks and bankers who serve their communities and customers honestly every day.”