Shares in Wells Fargo surged yesterday after the US regulator removed the 2017 asset cap that restricted the bank's assets to $1.95 trillion until it shored up risk management and board effectiveness to the Fed's satisfaction.
The cap emerged after Wells Fargo's inadequate response to the fake accounts scandal. "The hotly anticipated verdict closes the door on nearly a decade of scandals at the fourth-largest US lender and allows the bank to pursue growth again.
Since the cap was imposed in February 2018, it became the most-feared punishment in banking and caused Wells Fargo to miss out on an estimated $39 billion in profits, according to Bloomberg calculations."
Wells Fargo thought it would escape the cap, which was imposed in 2017, by the end of that year, but could not do so and hired in Charlie Scharf as chief executive in 2019.
"Under Scharf, the bank has sought to simplify its business, shrinking or exiting some operations while earmarking others to grow," said Bloomberg.
"He sold the firm's asset manager, corporate-trust unit, student-loan book, and later most of its commercial mortgage servicing business. He scaled back the home lending empire, which used to be the largest in US banking.
Just last month, the bank agreed to sell the assets of its rail equipment leasing business."
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