The Federal Reserve said Tuesday that Wells Fargo is no longer subject to harsh restraints the Fed placed on the bank in 2018 for having a toxic sales and banking culture.
It’s a win for Wells Fargo, which has spent nearly a decade trying to convince the public and policymakers that it had changed its ways.
“We are a different and far stronger company today because of the work we’ve done,” said Wells Fargo CEO Charlie Scharf in a statement. Scharf also announced that each of the 215,000 employees at Wells Fargo would receive a $2,000 award for turning the bank around.
Wells Fargo used to have a corporate culture where it placed unreasonable sales goals on its branch employees, which resulted in employees opening up millions of fake accounts in order to meet those goals. Wells’ top executives called its branches “stores” and employees were expected to cross-sell customers into as many banking products as possible, even if the customer did not want or need them.
After an investigation by The Los Angeles Times in 2016, Wells Fargo shut down its sales culture and fired much of its leadership and board of directors. The fake accounts scandal cost Wells Fargo billions of dollars in fines and lost business, and permanently tarnished its reputation, particularly because the scandal broke only a few years after the Great Recession and financial crisis. It was later revealed that Wells Fargo opened up roughly 3.5 million accounts that were not wanted or needed by customers.
Wells Fargo, once thought to be the best run bank in the country, was now the poster child of the worst practices of banking in decades.
In order to push Wells to fix itself, the Federal Reserve took the unusual step of placing Wells Fargo in a program where the bank could grow no larger than it was in 2018. No bank had previously been placed into such a program, known as an asset cap. The Fed required Wells to fix it culture and redo its entire risk and compliance departments in order to address its problems.
Since taking over in 2019, Scharf’s goal has been to convince the Federal Reserve that Wells Fargo had fixed its toxic banking practices. With the asset cap removed, the bank can now pursue more deposits, new accounts and take on additional investment banking businesses by holding additional securities on its balance shet.