Federal Reserve lifts Wells Fargo asset cap sanctions. What does that mean?

Wells Fargo’s nearly $2 trillion asset cap punishment by the Federal Reserve has meant the fourth-largest bank in the U.S. couldn’t grow in the wake of its massive fake sales account scandal. It was essentially stuck in place for the better part of a decade.

At 6:15 p.m. Feb. 2, 2018, the Fed ordered Wells Fargo to stop growing its assets beyond $1.95 trillion — where it stood at the end of 2017 — until the San Francisco bank could show it had improved its risk management operations and would not endanger customers.

The 2018 Consent Order restricted growth until certain conditions were satisfied, specifically governance and oversight. The asset cap limited the amount Wells Fargo could grow its total assets, which include cash, loans, investments and property. The enforcement action was meant to protect the bank’s customers.

It was the first time the Fed imposed such a broad restriction against a bank, forcing it to a standstill, The Wall Street Journal reported.

So while rival banks were growing, the unprecedented asset cap restricted Wells Fargo. For example, the cap meant the bank could not grow its net interest income on assets like loans, for example.

By July 2018, Wells Fargo had lost its ranking as the third-largest U.S. bank, the Observer previously reported.

The sanction was levied in response to abuses at Wells Fargo, including the bank’s creation of millions of fake bank, credit card and other accounts without customer approval, and its practice of forcing auto-loan customers to pay for unnecessary insurance policies.

Wells Fargo has its largest employee hub in Charlotte, with over 27,000 employees.

Based on the recommendation of the Reserve Bank and the Director of the Division of Supervision and Regulation, the Fed’s Board of Governors on Tuesday determined the asset growth restriction imposed by the 2018 Consent Order should be removed.