Monday, February 5, 2018
On Feb. 2, 2018, the last day of Janet L. Yellen's tenure as Chairman of the Federal Reserve Board, the board clamped down on Wells Fargo & Co. with a cease and desist order. This was in response to what the Fed determined to be "widespread consumer abuses and other compliance breakdowns by Wells Fargo." The Fed took action to restrict the company's growth and improve governance and risk management.
"The Board's action will restrict Wells Fargo's growth until its governance and risk management sufficiently improves but will not require the firm to cease current activities, including accepting customer deposits or making consumer loans," the Fed stated in a press release about its actions.
Among actions required to improve governance and risk management is a strengthening the effectiveness of the company's board of directors, particularly pertaining to the board's oversight activities. "Until the firm makes sufficient improvements, it will be restricted from growing any larger than its total asset size as of the end of 2017," the Fed said, adding that it required each current director to sign the cease and desist order, having concluded that the board "did not meet supervisory expectations" during the period of compliance breakdowns.
Breakdowns, which were widely reported in the media, included actions stemming from Wells Fargo's prioritization of overall growth without ensuring appropriate management of key risks. "The firm did not have an effective firm-wide risk management framework in place that covered all key risks," the Fed stated.
"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," Chair Janet L. Yellen said. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers."
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