Global: Wells Fargo (WFC.N) announced that the U.S. Office of the Comptroller of the Currency (OCC) has lifted a punishment imposed in 2016

This development marks the termination of the sixth consent order by regulators since 2019, as highlighted by CEO Charlie Scharf in a statement, prompting a more than 7% increase in Wells Fargo’s shares.

Scharf emphasized the bank’s commitment to implementing a robust risk and control framework suitable for its size and complexity, citing the closure of consent orders as a crucial indicator of progress.

Wells Fargo’s compliance challenges came to the forefront amid a sales practices scandal in 2016, leading regulators to impose heightened oversight on the institution in response to the turmoil.

A consent order, a formal enforcement action between a regulator and a bank, typically involves fines and directives to address identified issues promptly.

Analyst Scott Siefers from Piper Sandler noted that the sales practice issues were at the root of various challenges the bank faced in recent years.

Despite the termination of the OCC order, Wells Fargo still operates under eight open consent orders and is subject to a $1.95 trillion asset cap imposed by the Federal Reserve in 2018, restricting its growth until regulators determine that the underlying issues have been resolved.

Analyst Gerard Cassidy from RBC Capital Markets suggested that the removal of the OCC order could pave the way for the Federal Reserve to lift its consent order.

The OCC’s 2016 consent order mandated changes to Wells Fargo’s approach to offering and selling products and services, along with additional measures to safeguard customers and employees.

Banking analyst Ebrahim Poonawala from BofA Securities suggested that the recent development indicates Wells Fargo may be nearing the end of its nearly decade-long regulatory challenges.

Brian Mulberry, client portfolio manager at Zacks Investment Management, viewed the OCC’s action as a positive step but highlighted the importance of the Federal Reserve following suit for longer-term growth prospects.

Scharf, in an internal employee note seen by Reuters, described Thursday’s development as a significant milestone in setting the company on the right path.

Since assuming the CEO role in 2019, Scharf has overseen a turnaround effort, implementing cost-cutting measures following significant legal and regulatory costs incurred by the bank.

Stephen Biggar, director of financial services research at Argus Research, remarked on Scharf’s leadership, highlighting the confidence he has garnered from the board, management, and regulators.

Wells Fargo increased Scharf’s total compensation to $29 million in 2023, compared to $24.5 million in 2022, reflecting the bank’s acknowledgment of his contributions to its ongoing transformation.