The Federal Reserve modified the asset cap on Wells Fargo, San Francisco, on April 8, allowing the bank to lend more to small businesses under the Paycheck Protection Program.
The Fed announced that it will “temporarily and narrowly modify” the bank’s growth restriction which will allow the firm to make additional small business loans as part of the Small Business Administration’s PPP, as well as the Fed’s impending Main Street Lending Program.
“Wells Fargo appreciates the targeted action of the Federal Reserve to support the needs of small businesses through PPP and looks forward to expanding relief to many more small businesses and nonprofits,” said Wells Fargo CEO Charlie Scharf.
In the first two days since the PPP was launched April 3, the bank received more than 170,000 indications of interest in the program from its customers. While the asset cap didn’t specifically restrict Wells Fargo’s participation in the program, the bank will now be able to provide relief above the $10 billion lending cap previously allowed.
The growth restrictions were put in place because of the bank’s previous mismanagement of leadership and compliance and operational breakdowns, and provides an overall cap on the size of the firm’s balance sheet. The change implemented by the Fed allows PPP and Main Street Lending Program loans to small businesses hurt by the economic impact of the coronavirus to not count against the cap.
The Fed will require benefits from the PPP and the Main Street Lending Program to be transferred to the U.S. Treasury or to non-profit organizations approved by the Federal Reserve that support small businesses.
“While we are pleased to be able to help more small businesses through the Paycheck Protection Program, we note that the Federal Reserve’s action does not – and should not – in any way relieve us of our obligations under the consent order,” Scharf said in a statement.