Federal officials have informed Wells Fargo (WFC) that they have accepted the bank's plan to overhaul its risk management and governance, Bloomberg reported.
Shares of the San Francisco financial services company at last check were 4.8% higher at $36.48.
Chief Executive Charlie Scharf’s team submitted the revised plan in September, Bloomberg reported. That move came after the Federal Reserve prohibited the bank from lifting its assets beyond their year-end 2017 level until it implemented certain reforms.
The regulator acted after Wells Fargo was found to have defrauded customers through techniques such as establishing unauthorized accounts.
Employees opened checking and savings accounts that customers didn’t request or want, and it collected millions in fees as as a result.
Winning acceptance from the Fed is the second of four steps toward getting the sanction lifted. Much work remains to be done.
A number of top executives privately expect Wells Fargo won’t escape the asset cap until late this year at the earliest, while key Fed officials see the process dragging into 2022 or beyond, Bloomberg said in December.
To get the cap removed, executives must submit plans to make the board more effective and bolster risk management; get those plans approved by the Fed; adopt and implement the plans; and undergo a third-party review, which could take months.
Following that, the full Fed board will have to agree to end the sanction.
“The Federal Reserve will determine when the work to fulfill the requirements of the consent order is done to their satisfaction,” a Wells Fargo spokesperson told Bloomberg in an emailed statement.
“We are focused on doing the work. We maintain strong levels of liquidity and capital, and we are committed to using our financial strength to help support the U.S. economy and our clients while operating in compliance with the asset cap.”
Last year, Wells Fargo said it would pay $3 billion to settle investigations by the Securities and Exchange Commission and the Justice Department into the fake-accounts scandal.
Last month, Wells Fargo posted better-than-expected fourth-quarter earnings but revenue came in below forecasts.