By Manya Saini and Nupur Anand

(Reuters) -Wells Fargo on Thursday moved a step closer to getting its asset cap lifted after a top U.S. regulator lifted a 2015 punishment on the bank, leaving it with one more major hurdle to clear.

The move by the U.S. Office of the Comptroller of the Currency marks the thirteenth enforcement action, known as a consent order, closed by Wells Fargo’s regulators since 2019 and the seventh since the beginning of the year, the lender said.

Wells Fargo’s one remaining consent order, which includes a $1.95 trillion asset cap by the Federal Reserve in 2018, requires it to improve governance and controls after widespread consumer abuses.

The lifting of the OCC order is positive news for CEO Charles Scharf, who has spearheaded a sweeping cleanup effort since taking charge in 2019. Shares of Wells Fargo initially rose 1% in late-afternoon trading on the news, before paring gains in line with broader market weakness.

"This shows that the bank and the new management have made tremendous progress. These consent orders getting terminated show that the issues have been resolved to regulators’ satisfaction," said Stephen Biggar, banking analyst at Argus Research.

"Now the only last hurdle is to get the asset cap removed and the regulators just need to ensure that there are no chances of a relapse."

Wells Fargo said that the OCC’s 2015 order had been tied to its previously held financial subsidiaries.

PROLONGED REGULATORY TROUBLES

Wells Fargo’s regulatory woes came under the spotlight after a fake accounts scandal erupted in 2016, leading to intense scrutiny and billions of dollars in fines.

Since 2018, the bank has also operated under a U.S. Federal Reserve-imposed asset cap, one of the most severe penalties available to regulators, which bars it from growing its balance sheet beyond $1.95 trillion until its problems are fixed.

"The environment is right to finally put the nail in the coffin for all of Wells Fargo’s past sins. It has been a long time and the company has taken efforts to fix its issues," said Chris Marinac, director of research at Janney Montgomery Scott.

"All its peers have grown in this period while their growth has been stagnant and it is time for Wells to catch up."

Regulators imposed additional oversight of Wells Fargo following the scandal. The bank has been fined billions of dollars and faced public backlash after what the Federal Reserve described as "pervasive and persistent misconduct" that harmed consumers.

The bank has been managing its wholesale deposits and markets businesses carefully to comply with the cap, and those are areas that the company would expect to grow when the restrictions are lifted, Scharf told analysts in October.

Last year, Reuters, citing sources, reported the bank was in the last stages of a process to pass regulatory tests to lift the asset cap in 2025, after fixing the problems from its fake-accounts scandal.