Elizabeth Warren Urges Fed to Maintain Wells Fargo’s Asset Cap Until Risk Management Issues Are Resolved

Top Democratic Senator Elizabeth Warren has called on the Federal Reserve to maintain its $1.95 trillion asset cap on Wells Fargo until the bank addresses its ongoing risk management and compliance problems.

In a letter addressed to Fed Chair Jerome Powell and the central bank’s vice chair for supervision, Michael Barr, Warren insisted that the cap, imposed in 2018, should remain in place until Wells Fargo demonstrates that it can “properly manage the risks associated with running a large bank.”

Neither the Fed nor Wells Fargo provided comments regarding the letter, which was obtained by Reuters.

The asset cap, unprecedented in scale, was introduced following a series of scandals at the bank, including the revelation that employees created millions of fake customer accounts to meet aggressive sales targets. Bloomberg reported in September that Wells Fargo submitted a third-party review of its risk and control improvements to the Fed in a bid to have the cap lifted.

Warren’s letter comes amidst political shifts as Republican President-elect Donald Trump is poised to revamp bank regulations, a move expected to ease constraints on the financial industry. Analysts speculate that this could lead to the removal of Wells Fargo’s asset cap as early as next year—a prospect that has alarmed Democrats advocating for stricter regulatory oversight.

A prominent critic of Wall Street and a former presidential candidate, Warren is set to become the leading Democrat on the Senate Banking Committee. While she does not have the authority to directly influence the Fed’s decision, her letter is seen as an effort to pressure the central bank to maintain a tough stance on Wells Fargo and spotlight the bank’s regulatory failings.

Warren cited several instances of regulatory action against the bank since 2018. She noted that in September, the Office of the Comptroller of the Currency criticized Wells Fargo for deficiencies in its anti-money laundering oversight. Additionally, the senator highlighted an ongoing class-action lawsuit the bank faces concerning its diversity hiring practices.

Wells Fargo CEO Charlie Scharf has consistently emphasized the bank’s focus on improving its risk management and compliance framework. Since 2019, Wells Fargo has successfully resolved six regulatory consent orders.

At a 2018 Senate hearing, Powell committed to Warren that the Fed would require a vote of its Board of Governors before lifting the asset cap. In her latest letter, Warren reminded Powell of this commitment and urged the central bank to publicly disclose any third-party reviews submitted by Wells Fargo as part of its request to remove the cap.

By fLEXI tEAM