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Wells Fargo cuts jobs as the pandemic and penalties for past scandals take their toll

August 21, 2020, 5:58 PM UTC

Wells Fargo is resuming layoffs, as the beleaguered bank looks to cut costs to cope with the coronavirus pandemic and long-running regulatory issues that have hampered its growth.

While Wells Fargo pressed pause on job cuts in March amid the COVID-19 pandemic, Bloomberg reports today that the lender proceeded with layoffs earlier this month. The staff reductions are part of a larger cost-cutting initiative, meant to deal not only with the economic impact of the pandemic but with costly regulatory penalties associated with a series of high-profile scandals.

The cuts reportedly could cost thousands of people their jobs. Initial layoffs will affect many employees that the San Francisco–based banking giant had already planned to lay off earlier this year.

“We expect to reduce the size of our workforce through a combination of attrition, the elimination of open roles, and job displacements,” a Wells Fargo spokesperson told Bloomberg. Company executives have also recently floated the likelihood of branch closures and other spending reductions in an effort to save money.

Wells Fargo has set aside billions of dollars to account for loan losses exacerbated by COVID-19’s toll on the U.S. economy. Additionally, the bank is constrained by a $2 trillion asset cap imposed on it by the Federal Reserve. That asset cap serves as punishment for a wide range of misbehavior that emerged at Wells Fargo in the late 2010s, most notably a scandal in which employees opened hundreds of thousands of fake credit card and deposit accounts in customers’ names.

The asset cap has hindered Wells Fargo’s ability to keep up with its competitors among major banks. Most recently, the bank has had to sell hundreds of millions of dollars in assets to stay under that cap even as competitors expanded their corporate lending during the coronavirus crisis. 

The latest moves come as Wells Fargo CEO Charles Scharf looks to conclude a strategic review of the company that he launched upon joining the bank last fall. Already, the bank has been ringing in some changes; CFO John Shrewsberry will depart this fall after 22 years with the company, while chief compliance officer Mike Roemer is leaving his position after only two years in the role.