• The Fed lifted Wells Fargo’s $1.95 trillion asset cap imposed in 2018
• Cap was tied to governance failures after the 2016 fake accounts scandal
• The Fed cited substantial progress in risk management and oversight reforms
• The decision follows third-party reviews and regulator assessments by the San Francisco Fed
• CEO Charlie Scharf called the move a pivotal milestone for the bank’s transformation
• The bank plans growth in retail deposits, wealth, and investment banking
• Wells will award $2,000 bonuses to all full-time staff
• Critics say the cap was removed too soon, citing ongoing misconduct risks
• Sen. Elizabeth Warren slammed the move as a gift to Wall Street
• Analysts say Wells must now balance growth with strong risk controls

Wells Fargo is no longer shackled by the asset cap that has dogged it for more than seven years.

The Federal Reserve has removed the $1.95 trillion limit imposed on the bank in 2018, concluding the firm has met the governance and risk management conditions set forth in the wake of its fake-accounts scandal.

The penalty was part of a broader 2018 enforcement action that followed revelations in 2016 that Wells employees had opened millions of unauthorized customer accounts to meet aggressive sales goals.

In response, the Fed required the bank to overhaul its internal controls, governance structures, and risk frameworks.

Tuesday’s decision follows a third-party review, a comprehensive Fed assessment, and numerous supervisory activities by the San Francisco Fed.

“The removal of the growth restriction reflects the substantial progress the bank has made,” the Fed stated in a news release.

However, other components of the 2018 enforcement action will remain in effect, including mandates for board oversight improvements and continued risk management reporting.

The cap’s removal was widely expected in financial circles, particularly after a string of consent order terminations in recent months.

It marks a significant milestone for CEO Charlie Scharf, who has spent much of his tenure focused on regulatory repair.

“We are a different and far stronger company today because of the work we’ve done,” Scharf said, pointing to strategic changes in business mix, leadership, and operational discipline.

The bank will give a $2,000 award to all full-time employees to commemorate the milestone.

But while analysts largely welcomed the decision as a green light for growth, critics weren’t convinced the bank had earned redemption.

Senator Elizabeth Warren called the move “an outrageous giveaway” and slammed the Fed for acting “despite overwhelming evidence to the contrary.”

She cited the bank’s continued legal troubles and reports of recurring compliance failings, including warnings from whistleblowers about a return to risky sales tactics.

“It is stunning that the Fed couldn’t wait until the company went even a full year without breaking the law before wiping its slate clean,” she said.

Skepticism also came from market watchers. Oppenheimer analyst Chris Kotowski called the original penalty “absurd”, arguing that the blanket asset cap forced Wells to shed safe, low-yielding assets like treasuries and deposits, thereby distorting its business model.

Still, the bank appears poised to seize the moment. Scharf has outlined plans to grow retail deposits, expand wealth services, and ramp up investment banking.

Analysts expect a gradual acceleration rather than a sudden leap, with JPMorgan’s Vivek Juneja noting that the bank will likely maintain a disciplined, risk-aware stance as it reclaims market share.

The Fed’s decision was unanimous, and its former vice chair for supervision, Michael Barr, emphasized that oversight will continue.

“Removal of the asset cap represents successful remediation. All three – focused management, strong board oversight, and strict supervision – will need to continue,” he said.

Wells Fargo may now be able to compete more directly with peers like Bank of America and PNC, which grew assets by roughly 40% during the cap period.

Yet the cost of lost growth is only part of the story. As Columbia University’s Todd Baker noted, “Ironically, the restrictions have probably made Wells a better, more efficient bank.”