Fed terminates enforcement action imposed on Wells Fargo due to fake accounts scandal

By Pete Schroeder

WASHINGTON, March 5 (Reuters) - The U.S. Federal Reserve announced on Thursday it had terminated the enforcement action it imposed on Wells Fargo WFC.N following the bank's widespread fake accounts scandal, saying the bank had sufficiently overhauled its operations.

The central bank said it was lifting the action after nearly a decade of remediation work by the bank. The 2018 action included the unprecedented asset cap on the bank's growth, which was lifted in 2025.

The bank had no statement on the Fed's action beyond acknowledging its removal.

Lifting the asset cap was a major boon for the bank, which had been restricted in its growth for seven years as a result of the Fed's penalty, which was the first of its kind imposed by the central bank.

"The market has largely moved on from WFC's regulatory issues, especially since the asset cap was lifted last year," said R. Scott Siefers, a banking analyst at Piper Sandler, in a note.

"But the termination still represents an important psychological victory in that it was this order that first installed the asset cap. Thus, even if the stock doesn’t react, this is great to have in the rear view."

Shares of Wells Fargo were down 2.7% in afternoon trade amid broader weakness in financial stocks.

Thursday's relief now marks the final removal of any additional regulatory scrutiny imposed on the bank following its far-ranging sales practices scandal, which saw employees create millions of unauthorized accounts for customers.