US banking giant Wells Fargo has the capacity to provide about $384 billion of additional loans to small and medium-sized businesses (SMEs) and individuals, which is especially relevant during the corona crisis. However, the bank can’t help customers because of the asset cap imposed by the Federal Reserve (Fed).
Wells Fargo Asks Fed to Remove the Cap
The US has reported the most cases of coronavirus, and it seems the economic crisis is about to get even worse. President Donald Trump warned of the upcoming “very painful weeks,” while JPMorgan told investors that the stock market hasn’t bottomed out yet. In light of this, Wells Fargo could potentially help customers through its loans. However, it cannot unleash the funds because the Fed had previously imposed an asset cap.
Specifically, the central bank mandated Wells Fargo to keep its assets below $1.95 trillion. The Fed’s decision came in response to the bank’s fake account scandal. For years, Wells Fargo abused its clients by creating fake accounts on behalf of customers and forging documents.
Last week, the bank asked the Fed to remove the cap at least temporarily and let it support people and businesses during the crisis. People familiar with the matter told Bloomberg that the Fed didn’t feel Wells Fargo was ready.
While the bank hired a new CEO last year and announced massive restructuring, the Fed officials are skeptical about its potential to address regulatory concerns.
Wells Fargo didn’t clarify on the matter, but said in a statement:
While we cannot comment on regulatory matters, Wells Fargo is focused on satisfying the requirements of the consent order. During these challenging times, we are very focused on doing all we can for our clients while operating under the constraints of the asset cap.