Wells Fargo (NYSE:WFC) is 2.9% lower after hours after the Fed takes action to oust four board members and restrict the company's growth until governance is improved.
Citing "widespread consumer abuses and compliance breakdowns," the Fed's sanctions provide that Wells will replace three directors by April and another by year-end.
"Until the firm makes sufficient improvements, it will be restricted from growing any larger than its total asset size as of the end of 2017," the Fed says. It required each current Wells director to sign the cease and desist order.
"We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again," says Fed Chair Janet Yellen.
Along with letters to each current board member, the Fed sent letters to former Chairman/CEO John Stumpf and past lead independent director Stephen Sanger saying that "their performance in those roles, in particular, did not meet the Federal Reserve's expectations."
Updated 6:33 p.m.: Wells Fargo responds: “We take this order seriously and are focused on addressing all of the Federal Reserve’s concerns,” says CEO Timothy Sloan. “It is important to note that the consent order is not related to any new matters, but to prior issues where we have already made significant progress." He reiterated Wells is in strong financial position. Shares are now down 4.8% postmarket.
Now read: Wells Fargo: A Recap Ahead Of Earnings »
Subscribe for full text news in your inbox