Wells Fargo & Co. is banned from getting bigger until it can resolve a pattern of consumer abuses and compliance problems, in what Federal Reserve officials called an unprecedented sanction of one of the largest U.S. banks.
Four members of the company’s board are to be replaced by the end of the year, the Fed said Friday. And until the San Francisco-based lender addresses shortcomings including weak internal oversight, it can’t take any action that would increase its total assets beyond their size at the end of 2017, unless it gets advance permission from the regulator.
“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,” Fed Chair Janet L. Yellen said in a statement. She said the regulator can’t allow “pervasive and persistent misconduct at any bank.”
Wells Fargo rattled shareholders, clients and policy makers with a spate of scandals that erupted in September of 2016, when news broke that branch employees had opened millions of accounts without customer permission to meet aggressive sales targets.
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The company kept coming under fire after revealing that auto-loan clients were forced to pay for unwanted car insurance and that mortgage customers were improperly charged fees.
The Fed announced its sanctions for the biggest bank in Yellen’s former home district hours before her term as chair was set to expire. She was president of the San Francisco Fed from 2004 to 2010. Officials at the central bank said they had been working on the order for some time, and that the company first agreed to it on Friday.
Wells Fargo’s assets are now capped at $1.95 trillion. Fed officials say the lender is welcome to continue taking deposits and lending to customers, but it must stay below the cap. The firm’s compliance with the limit will be measured as an average of assets over two quarters, according to the regulator.
The Fed set a Sept. 30 deadline for the bank to outline reforms and have them reviewed by an outside firm. The asset cap can be lifted before the rest of the order is satisfied, officials said.