Wells Fargo was dealt another blow on Tuesday, as federal regulators slapped the bank with sanctions for failing to fix deficiencies in its “living will.”
The wills, also known as resolution plans, are required to show regulators how big U.S. banks would be dismantled in a failure without relying on taxpayer bailouts. In April, the Federal Reserve and the Federal Deposit Insurance Corp. gave Wells Fargo and four other banks until Oct. 1 to correct deficiencies in their 2015 wills.
On Tuesday, the regulators said San Francisco-based Wells was the only bank among the group that had not adequately remedied all of its deficiencies.
As a result, the regulators said they are banning Wells Fargo from establishing international bank entities, such as a branch in a foreign country, or acquiring nonbank subsidiaries.
Wells Fargo must file a revised living will addressing its deficiencies by March 31, the regulators said. If the deficiencies have not been adequately remedied by then, the regulators said they will limit the size of Wells Fargo’s nonbank and broker-dealer assets to levels as of Sept. 30, 2016.
If Wells Fargo has not adequately remedied its problems within two years, the regulators say they may require the company to divest certain assets or operations, to provide for an “orderly” resolution of the firm in bankruptcy.
Wells Fargo becomes the first bank to have regulators impose penalties on it for living will shortcomings.
It also marks the latest setback for Wells Fargo as it tries to repair its image in the wake of a major sales scandal, in which authorities found the bank’s employees may have opened more than 2 million deposit and credit card accounts without customers’ permission.
In a statement, Wells Fargo said it was “disappointed” with the regulators’ latest findings.
Wells Fargo said it took the regulators’ initial findings of deficiencies “very seriously” and that the company “took several steps” to address the problems.
“We believe that we substantially enhanced our capabilities in each of these areas identified,” the bank said. “However, we were informed today that we did not adequately remediate certain deficiencies.”
“Wells Fargo 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 so that we can bring our resolution planning processes in line with their expectations.”
Wells Fargo said it continues to be dedicated to sound resolution planning and preparedness and that the bank believes it “will be able to address the concerns raised today in the March 2017 revised submission.”
In April, the regulators announced they had also found deficiencies in the wills of Bank of America, Bank of New York Mellon, JPMorgan Chase & Co. and State Street.
On Tuesday, the regulators said those four banks had adequately fixed their deficiencies.