The Federal Reserve sent Wells Fargo & Co. back to the drawing table with its plan to prevent consumer abuses in the future, rejecting its plan and calling on the bank to put in place stronger checks on management.
Reuters, citing three people with knowledge of the discussions, reported that because the Federal Reserve rejected Wells Fargo’s plan it could take longer for the Fed to lift the asset cap on the company put in place due to a series of sales practices scandals. The bank is required to create a plan to improve risk management and governance before the cap on assets can be lifted. Back in February Tim Sloan, chief executive of Wells Fargo, said the company was “on the fast track” to get the cap lifted, reported Reuters. “We work diligently to address feedback provided,” Wells Fargo said in a statement to Reuters. “This is an ongoing, iterative process.”
Wells Fargo’s plan was submitted to the Federal Reserve in April, and the bank expected the Fed to approve it by the summer. Instead, it was told to go back and improve upon the plan. Wells Fargo is required to have stronger board oversight, agree to pay back customers hurt by its sales practices in the past and engage in more than 20 other actions designed to improve government, compliance and risk management, noted the report. Wells Fargo missed the September 30 deadline to have the plan approved, put in place and reviewed by a third party that was independent, noted the report.
During an appearance on CNBC earlier this week Sloan said the cap on assets should be lifted during the first half of next year, saying talks with the Fed were ongoing. “I’m optimistic that we’ll continue to make progress, but we need to demonstrate that we’re deserving of the asset cap being lifted,” Sloan said.