Lawyers and compliance officers at embattled Wells Fargo & Co. are hustling this week to prove that the bank and its board of directors are prepared to manage risks across its divisions, after federal regulators late Friday slapped the bank with an unprecedented enforcement action.

The board of governors of the Federal Reserve System imposed an asset freeze, in the form of a cease and desist consent order, that limits the San Francisco-based bank's growth to its December 2017 level. In effect, the order halts most lending.

“We cannot tolerate pervasive and persistent misconduct,” Fed chairwoman Janet Yellen said in a statement on her last day in the post. “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.”

Yellen described the order as unique and tougher than Fed penalties imposed against other banks, but she called it appropriate given the pervasiveness and persistence of the problems at Wells Fargo.

Timothy Sloan, Wells Fargo's president and chief executive officer, said in a statement, “We take this order seriously and are focused on addressing all of the Federal Reserve's concerns. It is important to note that the consent order is not related to any new matters.”

The Fed required each current director to sign the cease and desist action, and sent a copy to Wells Fargo general counsel Allen Parker.

The order also:

• Demanded that the board of directors play a stronger role in controlling risk and overseeing bank management. Wells Fargo consented to replace four more directors—three by April, and one by year's end. While the order called on the bank to do more to improve the board's governance, it did not explicitly require replacing more directors.

• Gave the bank 60 days to detail what it has done and plans to do to improve both the board's governance oversight, and the company's compliance and operational risk reforms.

• Imposed a sort of corporate monitor on the bank in the form of an independent third party that will review the bank's reform plans and their implementation. The review must be completed no later than Sept. 30. And the third party must be approved by the Fed.

When the third-party reviews have been completed to the satisfaction of the Fed, it will lift the limits on asset growth. But the bank said another third-party review will be conducted later to assess the “efficacy and sustainability of the risk management improvements.”

The Fed also sent critical letters to the Wells Fargo board of directors, former chairman of the board John Stumpf and former lead independent director Stephen Sanger. Neither Stumpf nor Sanger could be immediately reached for comment.

The letter to the board said the directors' risk management performance “did not meet our [the Fed's] supervisory expectations.” It was signed by Michael Gibson, director of the Fed's division of supervision and regulation.

“The board of directors must take further steps to ensure that senior management establishes and maintains an effective risk management structure that has sufficient stature, authority and resources; is independent of business lines; and is commensurate with the firm's size, complexity and risk profile,” the letter continued.

Gibson's letter to Stumpf said, “There were many pervasive and serious compliance and conduct failures ongoing during your tenure as chair.”

The letter said Stumpf did not give the directors a full report on the 3.5 million phony bank accounts scandal, and continued to support both the sales goals that were a major cause of the problem, and the senior executives most responsible for the misconduct.

The letter to Sanger said the former lead director failed to require a robust inquiry and demand further information about the serious compliance problems that were occurring at the bank.

“Your performance in that role [independent director] is an example of ineffective oversight that is not consistent with the Federal Reserve's expectations,” it concluded.