By Niket Nishant and Nupur Anand
(Reuters) -Wells Fargo said the U.S. Office of the Comptroller of the Currency has terminated a 2016 consent order over the bank’s sales practices misconduct, after years of work to repair the damage from a scandal that put it in regulators’ crosshairs.
The move marks the sixth consent order that regulators have terminated for the bank since 2019, CEO Charlie Scharf said.
Shares of Wells Fargo climbed over 6%, hitting their highest in over two weeks.
“I have repeatedly said that implementing a risk and control framework appropriate for a bank of our size and complexity is our top priority, and closing consent orders is an important sign of our progress,” Scharf said in a statement.
Wells Fargo’s compliance issues came under the spotlight after a scandal over its sales practices erupted in 2016, following which regulators mandated additional oversight of its practices.
A consent order is a formal, public enforcement action between a regulator and a bank, which often comes with a fine and orders to address an issue in a timely fashion.
The bank still has eight open consent orders, and is operating under a $1.95 trillion asset cap imposed by the Federal Reserve in 2018 that prevents it from growing until regulators deem that it has fixed its problems.
“The lifting of this OCC consent order, however, paves the way for the Federal Reserve to lift its consent order, in our opinion,” RBC Capital Markets analyst Gerard Cassidy wrote in a note.
The OCC’s 2016 consent order sought changes in the way Wells Fargo offered and sold products and services to consumers, and required the lender to take additional actions to protect its customers and employees.
“I think it (2016 order termination) will be a significant catalyst for the stock. Today’s consent order, I think was a larger one than the previous five,” said Stephen Biggar, director of financial services research at Argus Research.
Scharf became CEO in 2019, the fourth person to lead Wells Fargo since details of the misconduct emerged.
He has since been the face of the bank’s turnaround plan looking to cut costs after the lender racked up billions in lawsuits and regulatory fines.
“Under Scharf’s leadership there have been several changes and he has been working to clean things up and it shows that he has got the confidence of the board, the rest of the management and also the regulators,” Biggar said.
Wells Fargo hiked Scharf’s total compensation in 2023 to $29 million compared to $24.5 million in 2022.
(Reporting by Niket Nishant, Jaiveer Singh Shekhawat and Noor Zainab Hussain in Bengaluru; Nupur Anand in New York; Editing by Shinjini Ganguli and Jane Merriman)
