Fed, FDIC Say Wells Fargo 'Remediated Deficiencies' in 2015 Living Will -- 2nd Update
April 24 2017 - 6:43PM
Dow Jones News
By Emily Glazer
Wells Fargo & Co., girding for a contentious shareholders
meeting, got some unexpected good news on another front: regulators
signed off on its attempt to fix a blueprint for avoiding a bailout
should the bank ever founder.
The Federal Deposit Insurance Corp. and the Federal Reserve on
Monday said Wells Fargo passed its so-called living will for 2015.
The regulators had failed the bank early last year and dinged it a
second time in December, essentially meaning Wells Fargo had failed
a make-up test.
A Wells Fargo spokesman didn't immediately comment.
So-called resolution plans, known as living wills, are a
requirement of the 2010 Dodd-Frank law, which sought to prevent
bailouts partly by forcing big banks to develop a plan for how they
could go through bankruptcy without taxpayer assistance. The law
directed regulators to judge whether plans are credible and gave
them power to sanction, or even break up, firms that are found
lacking.
Wells Fargo's December failure marked the first time the Fed and
FDIC imposed penalties on a bank under the living-wills process,
barring Wells Fargo at the time from creating new international
banking units or acquiring any nonbank subsidiaries. There would
have been additional sanctions if the bank didn't pass its most
recent resubmission, such as capping growth or forcing it to divest
certain assets or businesses.
In failing the bank in December, regulators said they thought
the bank hadn't devoted enough resources to the test, or made
enough changes to its approach when compared with other banks, The
Wall Street Journal reported. Wells Fargo submitted a revised plan
in March 2017.
In a letter to Wells Fargo Chief Executive Timothy Sloan dated
April 24, the regulators highlighted the bank's steps in legal
entity rationalization and changes to better map shared services,
according to a copy shared with media.
Wells Fargo is next required to file a new living will plan by
July 1, 2017, alongside other banks.
Meanwhile, the bank must get through its annual shareholder
meeting Tuesday where some of its board members face opposition to
re-election. Shareholders, especially public pension funds, have
continued to come out against re-electing at least several
directors due to the bank's sales-practices scandal last year.
Rhode Island General Treasurer Seth Magaziner, who oversees the
state's pension fund for about 60,000 employees, said on a call
with media Monday that if other shareholders agree that there
should be changes in the bank's board, he hopes to have a "dialogue
with the bank about more appropriate choices."
Rhode Island's pension fund holds 139,256 Wells Fargo shares
worth about $7 million.
One large Wells Fargo shareholder, San Francisco-based Parnassus
Investments Inc., said Monday it is voting against re-electing five
Wells Fargo board members on its risk committee since the
"oversight was lax and their remedies tardy," according to the
investment firm. As of March 31, Parnassus funds held about 13
million Wells Fargo shares, or about 0.33% of shares outstanding,
according to FactSet.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
April 24, 2017 18:28 ET (22:28 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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