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Wells Fargo (WFC) to Continue Remediation Work for Asset Cap Lift
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Wells Fargo & Company (WFC - Free Report) expects to bear the brunt of asset growth restrictions, placed by the Federal Reserve in early 2018, for a little longer as it feels that the company still has work to do for improving its control systems.
CEO Charlie Scharf, in a conference recently said “We have to do the work”. “I can’t speak for the regulators. They’ll be the ones to determine when the work is done to their satisfaction, but again I can say it’s our priority.”
Further, he believes that though the pandemic made work on this aspect more challenging, lifting of consent order remains the company’s priority.
In order to have the asset cap lifted, Wells Fargo will have to submit a full-proof proposal, including the compliance and operational risk management program of improvement. On the Fed’s approval, Wells Fargo will appoint independent third-parties to conduct the review of its processes.
Post satisfaction of both the above points, full Fed board will be required to agree to revoke the sanction.
The Wall Street biggie was supposed to have fulfilled all the necessary remediation steps long back in 2018. However, it keeps failing the regulator’s expectations.
First proposal laid down by the bank as early as April 2018 was rejected by the central bank on demands of a stricter check over management. Notably, a second proposal has been submitted by Wells Fargo in September and the Fed’s decision regarding the same is still awaited.
At the conference, Scharf also stated that the company will introduce a new financial reporting system in January 2021 to include new segments along with new detail on the performances of businesses.
Our Take
Since the breakout of the bogus account openings scandal in late 2016, Wells Fargo has been getting involved in a number of probes, which are likely to keep its cost base elevated. However, the bank has diligently taken remedial measures and initiatives to keep afloat. Also, its cost-control plans might help it deal with the pressure on costs.
Shares of Wells Fargo have lost 2.5% over the past six months against 10.4% growth recorded by the industry it belongs to.
Apart from Wells Fargo, other Wall Street banks also remain under the scrutiny of regulators. In October, Citigroup (C - Free Report) was slapped with a $400 million penalty by The Office of the Comptroller of the Currency and the Federal Reserve for long-standing deficiencies in its risk management and internal controls processes. Also, Goldman Sachs (GS - Free Report) admitted to conspiring to violate the Foreign Corrupt Practices Act in connection with a scheme to pay more than $1 billion in bribes to Malaysian and Abu Dhabi officials.
Further, In November JPMorgan (JPM - Free Report) agreed to pay a fine of $250 million for poor risk management and internal controls over the fiduciary business.
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Wells Fargo (WFC) to Continue Remediation Work for Asset Cap Lift
Wells Fargo & Company (WFC - Free Report) expects to bear the brunt of asset growth restrictions, placed by the Federal Reserve in early 2018, for a little longer as it feels that the company still has work to do for improving its control systems.
CEO Charlie Scharf, in a conference recently said “We have to do the work”. “I can’t speak for the regulators. They’ll be the ones to determine when the work is done to their satisfaction, but again I can say it’s our priority.”
Further, he believes that though the pandemic made work on this aspect more challenging, lifting of consent order remains the company’s priority.
In order to have the asset cap lifted, Wells Fargo will have to submit a full-proof proposal, including the compliance and operational risk management program of improvement. On the Fed’s approval, Wells Fargo will appoint independent third-parties to conduct the review of its processes.
Post satisfaction of both the above points, full Fed board will be required to agree to revoke the sanction.
The Wall Street biggie was supposed to have fulfilled all the necessary remediation steps long back in 2018. However, it keeps failing the regulator’s expectations.
First proposal laid down by the bank as early as April 2018 was rejected by the central bank on demands of a stricter check over management. Notably, a second proposal has been submitted by Wells Fargo in September and the Fed’s decision regarding the same is still awaited.
At the conference, Scharf also stated that the company will introduce a new financial reporting system in January 2021 to include new segments along with new detail on the performances of businesses.
Our Take
Since the breakout of the bogus account openings scandal in late 2016, Wells Fargo has been getting involved in a number of probes, which are likely to keep its cost base elevated. However, the bank has diligently taken remedial measures and initiatives to keep afloat. Also, its cost-control plans might help it deal with the pressure on costs.
Shares of Wells Fargo have lost 2.5% over the past six months against 10.4% growth recorded by the industry it belongs to.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apart from Wells Fargo, other Wall Street banks also remain under the scrutiny of regulators. In October, Citigroup (C - Free Report) was slapped with a $400 million penalty by The Office of the Comptroller of the Currency and the Federal Reserve for long-standing deficiencies in its risk management and internal controls processes. Also, Goldman Sachs (GS - Free Report) admitted to conspiring to violate the Foreign Corrupt Practices Act in connection with a scheme to pay more than $1 billion in bribes to Malaysian and Abu Dhabi officials.
Further, In November JPMorgan (JPM - Free Report) agreed to pay a fine of $250 million for poor risk management and internal controls over the fiduciary business.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>