Federal Reserve Imposes Asset Limitation On Wells Fargo

Federal Reserve Imposes Asset Limitation On Wells Fargo

Yellen's final act at the Fed was to hit one of the largest USA banks, Wells Fargo & Co., with an unusual ban on growth that follows the San Francisco-based lender's pattern of consumer abuses and compliance lapses.

In the last major move of Chairwoman Janet Yellen's reign at the central bank, the Fed said it won't let Wells Fargo (WFC) add assets beyond the level of the end of 2017 until it improves governance and controls.

Until the Fed determines that the bank's practices have improved, the bank can not increase its assets beyond $1.95 trillion, where they stood at the end of 2017.

The statement said Wells Fargo had prioritized growth over ensuring effective risk management.

The bank said the asset cap will remain in effect at least until the strengthened oversight plans and the findings of the outside review win Fed approval.

US Federal Reserve chair Janet Yellen will join the Brookings Institution, a Washington-based think tank, after the expiry of her term as Fed chair.

Wells Fargo became engulfed in scandal in 2016 after admitting its employees had opened 3.5 million phony deposit accounts and lines of credit without clients' knowledge as part of high-pressure retail sales tactics the bank touted to investors but has since repudiated.

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Commercial real estate prices are now "quite high relative to rents", Yellen said.

Since then, the bank has also admitted to other questionable practices, including charging car-loan customers for insurance they did not need and charging improper fees to some mortgage borrowers.

Yellen will join former Fed Chairman Ben Bernanke at the Brookings Institution.

The Fed set a September 30 deadline for the bank to outline reforms and have them reviewed by an outside firm.

The Fed's unexpected censure of Wells Fargo should also be a boon to its rivals. Four members of the company's board are to be replaced by the end of the year, expanding an overhaul of the panel, the Fed said Friday.

Wells Fargo chose six autonomous chiefs in 2017, and three other individuals intend to resign before a yearly investors meeting, the organization said.

The bank must submit a plan to the Fed within 60 days detailing how it has enhanced oversight from its board of directors and improved compliance and risk management functions, and how it plans to improve further. The Office of the Comptroller of the Currency - the primary regulator for the firm's banking operations - soon followed up with more sanctions, including its own effort to squeeze the lender's growth in late 2016.

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