Please ensure Javascript is enabled for purposes of website accessibility

Wells Fargo Requests Removal of Asset Cap

By Bram Berkowitz - Updated Mar 23, 2020 at 6:44PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The bank says it will be able to further help customers and businesses affected by the coronavirus without the $1.95 trillion asset cap that was imposed after its fake-account scandal.

Wells Fargo (WFC 7.55%) has reportedly asked the Federal Reserve to remove the asset cap placed on the bank as a penalty for creating millions of fake bank accounts in 2016. Reuters first reported the news, citing an anonymous source.

The banking giant says that by removing the cap, which currently requires the bank to stay below $1.95 trillion in assets, it will be able to further assist customers and businesses impacted by the coronavirus pandemic.

Wells Fargo

Image Source: Getty Images

The bank at the end of 2019 had about $1.93 trillion in total assets, not leaving too much room for growth before hitting the cap. So, in order to stay in compliance and take on new assets, the bank would have to restructure the balance sheet and let certain parts run off.

Although growth projections will likely slow in most business lines at most banks, there could be new opportunities. For instance, Congress is preparing to grant hundreds of billions in new spending authority to the U.S. Small Business Administration (SBA) in order to help struggling businesses. Wells Fargo is a top SBA lender.

Bank of America analyst Erika Najarian said Wells Fargo could also likely benefit from deposit growth as people move their money to safer institutions during this time of uncertainty, according to Banking Dive.

Wells Fargo spokeswoman Arati Randolph said the bank could not comment on regulatory matters, and the Federal Reserve, which previously said the cap would be in place until the bank improved its governance and risk controls, did not comment either.

Last month, Wells Fargo agreed to pay a $3 billion fine to the Department of Justice and the Securities and Exchange Commission as part of its settlement over the bank's fraudulent account scandal.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wells Fargo & Company Stock Quote
Wells Fargo & Company
$40.76 (7.55%) $2.86

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.