Quick overview

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The fourth-largest US bank will no longer be required to operate under a $1.95 trillion asset valuation, thanks to the Federal Reserve’s decision to relax a significant restriction on Wells Fargo (WFC) imposed after a fake accounts scandal a decade ago.

This move was a victory for CEO Charles Scharf, who stated when he assumed the top position in 2019 that his “priority” was to clean up the mess left by his predecessors. In a statement, he stated, “The Federal Reserve’s decision to lift the asset cap marks a pivotal milestone in our journey to transform Wells Fargo.”.

Scharf will be able to launch an offensive to turn Wells Fargo into a significant player in the investment banking industry. The company is currently trailing Wall Street behemoths like Morgan Stanley (MS), JPMorgan Chase (JPM), and Goldman Sachs (GS) in this fiercely competitive industry.

The Fed imposed the extensive restriction as part of a broader consent order in 2018, citing “widespread consumer abuses” at Wells Fargo following federal investigations that exposed a comprehensive sales practice scandal in 2016. Its assets at the end of 2017 could not exceed $1.95 trillion unless regulators instructed it to do so,

The Federal Reserve stated in a press release that “the removal of the growth restriction reflects the substantial progress the bank has made in addressing its deficiencies and has fulfilled the conditions required for the growth restriction removal”.