NEW YORK – Wells Fargo still doesn’t have a credible plan for winding down its operations without taxpayer help if it should start to fail, federal regulators said Tuesday, putting new restrictions on the San Francisco bank’s ability to expand into new business areas.
The ruling is yet another regulatory headache for Wells Fargo, which is still grappling with the fallout from its admission this year that it had fired more than 5,000 employees over five years for fraudulently opening credit cards and other accounts customers didn’t want in order to meet aggressive sales goals.
That scandal is threatening to expand amid allegations that the bank may have sold customers Prudential insurance policies they didn’t want. This week, Prudential said it is suspending the sale of its life insurance policies through Wells Fargo as it investigates those allegations.
“We are deeply concerned about these allegations as they are completely counter to our values and our commitment to providing customers only the products and services they need and want,” the company said in a statement.
Now, Wells Fargo must also contend with federal regulators enforcing rules aimed at preventing future taxpayer bailouts of banks designated as “too big to fail.”
In April, the Federal Reserve and the Federal Deposit Insurance Corp. rejected bankruptcy plans, known as “living wills,” submitted by five of the country’s largest banks. On Tuesday, the regulators said that Bank of America, Bank of New York Mellon, JPMorgan Chase and State Street had “adequately remediated deficiencies.”
But Wells Fargo, which has nearly $2 trillion in assets, failed the test again. The bank has until March to submit a plan for addressing regulators concerns.
Wells Fargo said Tuesday that it was “disappointed” with the determination. The bank “is committed to strengthening and enhancing its resolution planning processes, and we will continue to work closely with the agencies to better understand their concerns,” it said in a statement. “We believe we will be able to address the concerns raised today in the March 2017 revised submission.”
The living wills are a critical requirement of the 2010 financial-reform legislation known as Dodd-Frank, which is aimed at preventing a repeat of the taxpayer bailouts that took place during the 2007-2008 financial crisis. Congress demanded that big banks regularly submit detailed contingency plans. Eventually, if a bank does not address the problems in its plan, regulators could force the bank to sell off units or close lines of business.
However, Wells Fargo’s headache comes at a time when President-elect Donald Trump has promised to dismantle key parts of Dodd-Frank. Trump has not said specifically what parts of the legislation could be rolled back, but banking industry officials have complained that the “living wills” process is unnecessary and doesn’t properly measure the steps big banks have taken in recent years to bolster their balance sheets.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.