Late Friday, on Janet Yellen's last day as Federal Reserve Chair, the regulator slapped the San Francisco-based lender with sanctions for poor governance, compliance and risk management relating to abusive sales practices that culminated in the creation of millions of fake accounts and inappropriate charging of auto-insurance and mortgage fees. The Fed has prohibited the bank from becoming any larger than its 2017 end of year total assets until there have been sufficient improvements made.
It also announced that until the bank proves its compliance and obedience of governance rules, it is prohibited from growing past its end of 2017 size.
During Yellen's four-year term, unemployment fell to 4.1 per cent, from 6.7 per cent when she took office.
Federal Reserve Chair Janet Yellen will join the Brookings Institution, a Washington think tank, on Monday after stepping down from the US central bank.
The bank said the asset cap will remain in effect at least until the strengthened oversight plans and the findings of the outside review win Fed approval.
Ms. Yellen will be remembered, too, for her achievements in deftly guiding the Fed's role in the US economy's slow recovery from a crushing financial crisis and recession.
"The thing she'll be mostly known for is steering the economy into a fabulous position", said Princeton economist and former Fed Vice Chairman Alan Blinder.
The Fed set a September 30 deadline for the bank to outline reforms and have them reviewed by an outside firm.
"The firm has much to do to gain back the trust of its clients, managers, financial specialists and people in general", Yellen told the legislator.
Options for preventing asset growth include limiting deposits from companies and other banks, and dialing back trading assets and other short-term investments, the presentation showed. The Fed didn't identify which board members will have to leave. Elizabeth Warren, the Massachusetts Democrat, had requested the Fed oust Wells Fargo board members.
Wells Fargo has paid $185 million in fines and offered redress to harmed customers.
Letters were also sent to former Chairman and Chief Executive Officer John Stumpf and past lead independent director Stephen Sanger stating that their performance in those roles, in particular, did not meet the Federal Reserve's expectations.
Late a year ago, the OCC told the bank's board that authorities may take additional enforcement actions over the auto insurance and mortgage improprieties, people familiar with the situation said.