Wells Fargo is getting a break thanks to the COVID-19 pandemic.
The Federal Reserve Board said on Wednesday (April 8) that they will temporarily and narrowly modify the growth limits placed on the California financial services company due to what they called “extraordinary disruptions” caused by the coronavirus.
Under the terms of the deal, Wells Fargo can provide additional support to small businesses. The change, the Fed said, will only allow the firm to make small business loans as part of the recently approved Paycheck Protection Program (PPP) by Congress, and the Federal Reserve’s forthcoming Main Street Lending Program.
The Board said they imposed the restriction because of widespread compliance and operational breaches that hurt consumers.
“The growth restriction does not prevent the firm from engaging in any type of activity, including the PPP, the Main Street Lending Program or accepting customer deposits,” the Fed said. “Rather, it provides an overall cap on the size of the firm’s balance sheet. The change today provides additional support to small businesses hurt by the economic effects of the coronavirus by allowing activities from the PPP and the Main Street Lending Program to not count against the cap.”
Wells Fargo has faced a series of legal challenges. Last month, the Associated Press reported that the third chief executive of Wells Fargo in four years appeared in front of Congress, saying that there’s much the bank needs to do to fix its problems, and that it could take two more years.
Nearly four years ago, the bank was caught in a series of legal and regulatory troubles. The AP reported that Wells Fargo paid a $3 billion fine in February for illegal sales practices, on top of $1.2 billion in fines it had already paid. The bank remains under restrictions imposed by the Federal Reserve, not allowing Wells to grow any larger until its cultural problems are fixed, the AP wrote.
“I am confident we can move this company in a significantly improved direction,” CEO Charles Scharf said at the time.