Summary
Wells Fargo & Company (WFC) has entered into an Amendment of Consent Order with the Federal Reserve, effective April 8, 2020. This amendment modifies the original Consent Order from February 2, 2018, which pertains to the company's governance and risk management. The key change allows Wells Fargo to exclude certain on-balance sheet exposures related to loans made under the Small Business Administration's Paycheck Protection Program (PPP) and the Federal Reserve's Main Street Business Lending Program from its asset cap calculation. This exclusion is subject to specific terms and conditions outlined in the Amendment. This development is significant for investors as it provides operational flexibility for Wells Fargo to participate more readily in critical government lending programs designed to support businesses during the economic downturn caused by the COVID-19 pandemic. By temporarily excluding these specific loan portfolios from the asset cap, the company can potentially increase its lending capacity without immediately triggering restrictions imposed by the existing Consent Order. This could enable Wells Fargo to play a more substantial role in economic relief efforts and potentially mitigate some of the negative impacts of the pandemic on its loan origination activities.
Key Highlights
- 1Wells Fargo amended its February 2018 Consent Order with the Federal Reserve.
- 2The amendment is effective as of April 8, 2020.
- 3The core change allows the exclusion of certain on-balance sheet loan exposures from the asset cap.
- 4Excluded loan exposures are those related to the Paycheck Protection Program (PPP) and the Main Street Business Lending Program.
- 5This exclusion provides operational flexibility for Wells Fargo to participate in government support programs.
- 6The terms and conditions of the Amendment govern the exclusion of these loans from the asset cap.