Wells Fargo’s asset cap could hobble its response to Paycheck Protection Program lending
BUSINESS RECORD STAFF Apr 6, 2020 | 4:49 pm
1 min read time327 wordsAll Latest News, Banking & Finance
One of the nation’s largest lenders may be kept largely on the sidelines of a special lending program aimed at keeping small businesses alive during the coronavirus shutdown, the San Francisco Business Times reported. Wells Fargo said Sunday evening that it has exhausted its $10 billion capacity for lending under the SBA’s Paycheck Protection Program. For more than two years, the bank has been under a $1.95 trillion regulatory asset cap imposed by the Federal Reserve following a raft of scandals, including revelations that employees had opened millions of accounts without customers’ authorization.
“Today, the company continues to operate in compliance with an asset cap imposed by its regulator due to actions of past leadership,” Wells Fargo CEO Charlie Scharf said in a statement Sunday. “While we are actively working to create balance sheet capacity to lend, we are limited in our ongoing ability to use our strong capital and liquidity position to extend additional credit.
“Since I arrived at the company, I have been clear that we will direct all resources necessary to do the work required by our regulators and we are in the process of doing so,” Scharf said. “We are committed to helping our customers during these unprecedented and challenging times, but are restricted in our ability to serve as many customers as we would like under the PPP.”
Wells Fargo closing its loan window under the special SBA program is likely to stun millions of small business owners across the country that bank with Wells Fargo and were planning to apply this week for the SBA PPP loans that eventually become grants if the money is used to keep employees on the payroll and to pay other eligible expenses.
Before the current crisis, Fed Chairman Jerome Powell made certain promises about what would have to happen before the asset cap gets lifted, according to an April 1 article in American Banker. Those remarks could constrain the central bank’s ability to improvise.