Wells Fargo’s Asset Cap Has Been a Good Punishment

The growth cap imposed on Wells Fargo & Co. since 2019 seemed a uniquely harsh punishment by US watchdogs, constricting the bank’s growth through a period when some rivals bloomed. In truth, however, it instilled a discipline and focus that would benefit many lenders, and Wells Fargo has emerged from its limbo fitter than others.

The Federal Reserve finally removed the limit on the San Francisco-based lender’s total assets after the market closed on Tuesday, saying Wells Fargo had now met all the conditions for improving risk, compliance and governance demanded by its 2018 consent order. The bank will now be free to pursue faster growth, particularly in gathering deposits to boost net interest income and fund a further expansion of its trading business in the investment bank. Still, Chief Executive Officer Charlie Scharf must keep his own tight rein on bankers champing at the bit and ensure that the growth he pursues is as profitable and sustainable as the business he’s overseen under the cap’s constraints.