The move hands a major victory to CEO Charlie Scharf, who has been cleaning up the bank since taking the top job in 2019. It also sent the bank's shares up more than 2% as investors anticipated that the company could now expand.
"It will be a significant bump for the stock in the near term and also paves the way for long-term growth as they don't have to manage their business around the asset cap now," said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds JPMorgan stock.
The Fed imposed the unprecedented restriction in 2018 following years of high-profile missteps at the bank, including a far-ranging scandal in which employees opened millions of unauthorized accounts for customers.
But the Fed said in a statement that the bank had made "substantial progress" in addressing its deficiencies, including improving its governance and risk-management programs, and completing a third-party review of its overhaul.
The Fed board voted unanimously to lift the restriction, which was the first time the central bank had directly ordered a bank to stop growing in order to address widespread shortcomings.
The decision is a major step in the bank's longstanding efforts to repair the damage from scandals that erupted in 2016, drawing public criticism and billions of dollars in fines.
Scharf called the move a "pivotal milestone" in the bank's transformation.
"We are a different and far stronger company today because of the work we’ve done," he said in a statement, adding that all full-time bank employees will receive a $2,000 award to commemorate the accomplishment.
While the bank still faces some additional oversight from the Fed as part of the 2018 order, the removal of the asset cap marks a major shift for the nation's fourth-largest lender, after the scandals ousted multiple executives as regulators piled fines and restrictions on the bank for its wrongdoing.
The bank came under regulatory scrutiny for years after scandal erupted in 2016, which revealed the bank also charged unnecessary mortgage fees and forced drivers to buy car insurance they did not need, often to meet sales goals.
It paid billions in penalties and was also slapped with lawsuits from customers and shareholders. Before Scharf was hired as CEO, two former chief executives left in the wake of the controversy. The bank became a major focus of criticism in Washington as well, with numerous lawmakers calling for executives to be removed and for the bank possibly to be broken up.
The lender cleared numerous consent orders this year, and over a dozen since 2019.
Regulators impose consent orders, or public enforcement actions that are often accompanied by fines. The orders instruct banks to fix problems in a timely way.
Scharf said last year the asset cap was curtailing the bank's ability to take in more corporate deposits and expand its trading business at a time when peers have grown.
The bank has been managing its wholesale deposits and markets businesses carefully to comply with the cap, and those are areas it would expect to expand when the restrictions are lifted, Scharf told analysts in October.