Wells Fargo (WFC -0.89%) is one of the best-performing stocks in the financial sector on Wednesday. As of 11:30 am EST, the large-cap bank had risen by nearly 6% on a day when most major indices are in the red.
While that certainly wasn't a positive catalyst, investors got some excellent news regarding the bank's future.
Specifically, it was reported that the Federal Reserve has indicated it will accept Wells Fargo's plan to overhaul its governance practices. This would be a key milestone in the bank's efforts to remove the growth penalty imposed by the Fed in the wake of the bank's numerous scandals in the mid-2010s. Under the penalty, the bank is prohibited from growing larger than its asset size at the end of 2017, which has been a major handicap in recent years.
To be sure, the penalty isn't likely to be removed right away. Wells Fargo would still need to implement its plan to the satisfaction of the Fed, which would still need to vote to remove the cap. Even so, the asset cap has been the main reason Wells Fargo has dramatically underperformed its peers in recent years, so any progress toward getting it removed is welcome.