In a statement, the Federal Reserve Board declared that it "would restrict the growth of the firm until it sufficiently improves its governance and controls".
On Monday morning, Jerome Powell, better known as Jay, will be sworn in as the next chairman of the Federal Reserve, picking up the reins from arguably the most powerful woman in the world and one who has led the Fed since 2014 - Janet Yellen.
It also announced that until the bank proves its compliance and obedience of governance rules, it is prohibited from growing past its end of 2017 size.
Wells Fargo CEO Tim Sloan said: "While operating under this constraint, we are open for business and we will continue to serve our customers' financial needs including saving, borrowing, and investing".
US Federal Reserve chair Janet Yellen will join the Brookings Institution, a Washington-based think tank, after the expiry of her term as Fed chair.
The bank said the asset cap will remain in effect at least until the strengthened oversight plans and the findings of the outside review win Fed approval.
Commercial real estate prices are now "quite high relative to rents", Yellen said. Until Wells Fargo tends to weaknesses in territories including interior oversight, it can't make any move that would help add up to resources past their level toward the finish of 2017, without the Fed's consent. The company kept coming under fire after revealing that auto-loan clients were forced to pay for unwanted vehicle insurance and that mortgage customers were improperly charged fees.
Of her appointment at Brookings, Yellen said in the same statement that "I'm delighted to be joining the Brookings Institution". Information about the company's return on equity and return on assets will be disclosed at the May 2018 Investor Day presentation, the bank said.
Concurrently with the Fed action, Wells Fargo will replace three current board members by April and a fourth by the end of the year.
Late a year ago, the OCC told the bank's board that authorities may take additional enforcement actions over the auto insurance and mortgage improprieties, people familiar with the situation said.
The bank must submit a plan to the Fed within 60 days detailing how it has enhanced oversight from its board of directors and improved compliance and risk management functions, and how it plans to improve further. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers".