Fed to put Wells Fargo remediation plan to public board vote: letter
WASHINGTON (Reuters) – The Federal Reserve board will hold a public vote on whether to lift growth restrictions on scandal-hit Wells Fargo following pressure from Democratic Senator Elizabeth Warren, the Massachusetts lawmaker said on Friday.
The Fed’s policy shift could make it tougher for Wells Fargo to shake off the unprecedented sanctions that the bank said on Thursday are expected to crimp earnings by around $100 million.
In February, the Fed ordered Wells Fargo to keep its assets below $1.95 trillion until it had improved its governance and risk controls following a wave of sales practices scandals. The regulator previously said Fed staff would assess the adequacy of the bank’s remediation plan, which would also be reviewed by an independent third party.
During a congressional hearing in March and in a follow-up letter, however, Senator Warren pressed Fed Chair Jerome Powell to submit the bank’s remediation plan to a board vote and to consider publishing the third-party review.
On May 10th, Powell wrote to Warren that he accepted the request for a board vote.
“After further consideration, the decision about terminating the asset growth restriction will be made by a vote of the Board of Governors,” Powell wrote in the letter published by Warren’s office on Friday.
He added that when the third-party review is ready, “we will review that report to determine whether and to what extent the report can be publicly disclosed.”
The Fed declined to comment on Friday beyond Powell’s letter. A spokeswoman for Wells Fargo declined to comment on the Fed’s decision.
On Thursday, Wells Fargo told investors the cap would hurt earnings less than it thought this year.
The bank previously expected the asset cap to hit after-tax net income by up to $400 million, but lower deposit and loan growth gave it room under the limit and caused it to cut that figure to less than $100 million, Treasurer Neal Blinde said.
The bank said in financial filings that it had received detailed feedback from the Fed regarding its remediation plan. In order to have enough time to incorporate this feedback, Chief Executive Tim Sloan said the bank was planning to operate under the cap for the first part of 2019.
“I’m glad the Fed’s Board of Governors changed course,” Warren said in a statement. “The Fed must strictly enforce its order to show Wells Fargo that it means business.”
Reporting by Michelle Price; Editing by Dan Grebler