Fed up

2 Feb 2018 By Antony Currie, Christopher Beddor Follow @AntonyMCurrie

The Fed chief used her last day in office to slap a restraining order on the $2 trln U.S. bank. It’s mostly a symbol, and a late one: boss Tim Sloan has already started to clean up the company’s act. But the Fed action could persuade Wells’ new chair that it’s time for a change of leader.

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The Federal Reserve has forbidden Wells Fargo from growing its assets beyond the nearly $2 trillion it had on its balance sheet at the end of 2017, it said on Feb. 2. The bank also has to improve governance and risk management and strengthen the effectiveness of oversight by its board.

Wells Fargo will be allowed to grow assets again once it convinces the Fed that it has made sufficient improvements.

Chief Executive Tim Sloan told shareholders that the restrictions would probably reduce the lender's earnings by $300 million to $400 million this year. That equates to around 1.7 percent of the $23.7 billion Wells is expected to earn this year, according to the consensus estimate of sell-side analysts.

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