Wells Fargo is replacing four members of its board and will be prevented from growing beyond a certain asset level under a rare action by the U.S. Federal Reserve.
The Wall Street Journal reported the unprecedented action by the Fed late last week, saying that it was prompted by what the government agency described as “widespread consumer abuses.” The announcement came on Janet Yellen’s final day as chairwoman of the Federal Reserve, amid calls from Senator Elizabeth Warren for Wells Fargo to replace its entire board. According to the report, Wells Fargo expects the Fed’s action to reduce its profit this year by between $300 million and $400 million on a pre-tax basis.
This marks the first time the Fed has placed limits on the size to which an entire company can grow. Wells Fargo is prevented from growing beyond $1.95 trillion in assets, which is where it ended 2017, but was granted permission to continue lending and accepting banking deposits. The bank has recently been embattled in scandals, including opening accounts without customers’ knowledge or permission and forcing thousands more into auto insurance they didn’t need or want.
As for its board, Wells Fargo has 60 days to improve the board governance oversight and compliance and risk management. The Fed said three board members will be replaced by April and a fourth by year-end.
“We cannot tolerate pervasive and persistent misconduct at any bank, and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again,” Yellen said in a statement. Meanwhile, Wells Fargo’s Chief Executive Timothy Sloan said, “we take this order seriously and are focused on addressing all of the Federal Reserve’s concerns.”