Wells Fargo, the US-based financial services company with $1.9 trillion in assets, has lost its chief compliance officer, Mike Roemer. Roemer’s departure follows a two-year long attempt to overhaul the bank’s internal oversight and risk management functions. Under a new organisational structure, each division of the bank will have its own chief risk officer, who will consider all risk types including compliance, operational, and credit. The officers will report to the chief risk officer to maintain centralised risk management.

The need for risk management reform follows the bank’s prior scandal. Between 2002 and 2016, employees met their sales goals through fraudulent means – opening accounts in the name of customers who had no knowledge of them doing so, signing customers with accounts up for credit cards or bill payment programmes without their knowledge, creating false personal ID numbers, forging signatures and covertly transferring customers’ money. 1.5 million false deposit accounts and over 500,000 fake credit cards were created. Consequently, 5,300 low-level employees were fired for such action. Prosecutors in court referred to the environment at Wells Fargo as high-pressure with increasing and often unrealistic sales goals, perhaps providing an indication as to why employees were willing to commit fraud just to meet their goals – sales goals that were stopped after the scandal.

Following the discovery of the fraudulent activity, Wells Fargo was fined $185 million by the Consumer Financial Protection Bureau. The CEO, John Stump, lost his job and $41 million in compensation. US regulators including the Federal Reserve imposed a $1.95 trillion asset cap on the bank in 2018. Though it was initially said that the Federal Reserve would lift the cap in early 2019, it is still being imposed. Allegedly, the asset cap has caused Well Fargo to lose $220.1 billion in stock market value – in addition to the $3 billion the bank agreed this February to pay to settle criminal charges and civil action against it for its scandal.

This year, in April, it was announced that the Federal Reserve would lift the cap, so that Wells Fargo would be able to take part in the US government’s lending programmes aimed at limiting the effects of the coronavirus pandemic. Modifying the cap could increase loans given to small businesses. As the third-largest bank in the US when ranked by assets, Wells Fargo’s participation in lending programmes is vital to the US’s coronavirus response.

The Federal Reserve stated that lending by Wells Fargo through the Small Business Administration’s Paycheck Protection Programme and the US central bank’s Main Street Lending Programme would not be counted against the cap for the duration of both programmes. However, it was reported in May that the bank was finding it difficult to stay beneath the cap, which limited its ability to deal with the economic effects of the pandemic. Clients of the bank were quick to put deposits down in the bank, causing it to come close to its asset cap. This led the bank to take action – such as moving some deposits externally.

In April, it was revealed that Wells Fargo had lost 90% of its net income due to the pandemic, and its share price fell 13% between February (the initial stages of the coronavirus’s economic impact). However, customer activity stayed strong despite the pandemic – including an increase in commercial loans of $52 billion. JP Morgan suffered a comparable (though admittedly much smaller) of 69% in the first quarter of the year. It will be interesting to see whether Wells Fargo is able to recover from the economic hardship brought about by the coronavirus, or whether in conjunction with its asset cap, the decline in the economy will be too much for the bank to bear.