Wells Fargo told to halt expansion

07 February, 2018, 02:03 | Author: Shannon Aguilar
  • In her last interview before being replaced by Jerome Powell outgoing US Federal Reserve Chair Janet Yellen said solid economic growth faster wage increases and a tightening labor market mean the U.S. central bank is likely to continue raising interest

In his remarks, Powell praised Yellen as the most qualified person to hold the job of Fed chair in the central bank's history.

The Federal Reserve's surprise ban on Wells Fargo & Co growing its balance sheet comes at a hard juncture for the United States' third-largest lender.

The bank said the asset cap will remain in effect at least until the strengthened oversight plans and the findings of the outside review win Fed approval.

Yellen's term as Fed chair will expire on February 3.

When Janet Yellen leaves the Federal Reserve this weekend after four years as chair, her legacy will include having shattered a social barrier: She is the first woman to have led the world's most powerful central bank, a position that carries enormous sway over the global economy.

Yellen added that the enforcement action the Fed is taking will ensure Wells Fargo is not going to expand until it can do so in a safe manner and with protections in place that are needed to manage all its risks and to protect all its customers. Wells Fargo began stumbling through a spate of scandals 17 months ago, starting with revelations that branch employees opened millions of accounts without customer permission to meet aggressive sales targets.

Commercial real estate prices are now "quite high relative to rents", Yellen said. The company kept coming under fire after revealing that auto-loan clients were forced to pay for unwanted vehicle insurance and that mortgage customers were improperly charged fees.

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Powell, who has served on the Fed board with Yellen since 2012, ended his remarks by popping the collar of his suit jacket. She is joining the Brookings Institution think tank.

While its banking industry rivals grown, the Fed sanctions will hold Well's Fargo's total consolidated assets to the $2 trillion level measured as of December 31, 2017.

Wells Fargo elected six independent directors in 2017, and three other people plan to retire before an annual shareholders meeting, the company said. She argued that the Fed could leave its key policy rate near zero for far longer than previously thought prudent.

Wells Fargo has 60 days to give the Fed the bank's plans to improve oversight and governance, as well as enhance risk management.

Wells Fargo will be able to continue current activities including accepting customer deposits or making consumer loans, the Fed said.

The Fed's move is the latest and most serious regulatory action against the bank over the past year and a half.

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