US eases restrictions on Wells Fargo after years of strict oversight following scandal

NEW YORK — The Biden Administration eased some of the restrictions on banking giant Wells Fargo, saying the bank has sufficiently fixed its toxic culture after years of scandals.

The news sent Wells Fargo’s stock up sharply Thursday as investors speculated that the bank, which has been kept under a tight leash by regulators for years, may be able to rebuild its reputation and start growing again. The bank’s shares closed up 7.2% to $52.04, its highest level since March 2022, in extremely active trading.

The Office of the Comptroller of the Currency, the regulator of big national banks like Wells, on Thursday terminated a consent order that had been in place since September 2016. The order required Wells to overhaul how it sold financial products to customers and provide additional consumer protections, as well as employee protections for whistleblowers.

That consent order was put into place after a series of newspaper and government investigations in 2016 found Wells to have a poisonous sales culture that pressured employees into selling multiple products to customers though such products were not needed. Employees — who worked at “stores” not bank branches — were forced to open millions of unauthorized accounts. Customers had their identities stolen and their credit scores impacted. Of the millions of customers effected, a disproportionate number were non English-speaking Americans.

The scandal severely tarnished the reputation of San Franciscobased Wells Fargo, which eight years ago was considered one of the best run banks in the country by investors and analysts.

Since the scandal broke, Wells overhauled its board of directors and management, paid more than a billion dollars in fines and penalties, and has spent eight years trying to show the public that the bad practices are a thing of the past. The scandal led to unionization efforts at some branches as employees protested how managers pushed unreasonable sales goals.

In a brief statement Thursday, the Comptroller of the Currency said that Wells Fargo’s “safety and soundness” and “compliance with laws and regulations does not require the continue existence of the Order.”

The decision is a major victory for Wells’ management and Charles Scharf, who took over as CEO in 2019.