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Fed's Powell says Wells Fargo asset cap to stay in place until problems fixed

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FILE PHOTO: A Wells Fargo logo is seen in New York City
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By Pete Schroeder

(Reuters) -Federal Reserve Chair Jerome Powell said on Wednesday that the Fed is closely monitoring efforts by Wells Fargo & Co to fix its "widespread and pervasive" problems, and that it would take appropriate actions if the bank failed to do so.

In 2018, the Federal Reserve ordered Wells Fargo to keep its assets below $1.95 trillion until it had improved its governance and risk controls following sales practice scandals. That constrains Wells Fargo's ability to make new loans.

Powell said on Wednesday that the bank's asset cap would stay in place until the firm has comprehensively fixed its problems, suggesting the bank had a ways to go before it would be allowed to expand in size.

"We're not going to remove that asset cap until that's done," he said.

A Wells Fargo spokeswoman did not immediately respond to a request for comment.

Earlier this month, the Office of the Comptroller of the Currency fined the bank $250 million for failing to properly pay back wronged customers as directed in a 2018 consent order.

The OCC also placed new restrictions on the bank's ability to expand its mortgage servicing business until it had addressed those shortcomings. At the time, Wells Fargo CEO Charles Scharf said the bank was still working on addressing "significant, longstanding deficiencies."

On Wednesday, Powell said the Fed was closely monitoring the bank's efforts to address its numerous issues, and would not hesitate to impose fresh penalties if it fails to meet its expectations.

(Reporting by Lindsay Dunsmuir and Ann Saphir, writing by Megan Davies; editing by Diane Craft and Edward Tobin)

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