WASHINGTON — Regulators have approved the latest iteration of Wells Fargo’s 2015 living wills, ending the restrictions they imposed on the embattled bank in December after it failed for a second time in a row to file a credible bankruptcy plan.
In a statement issued Monday, the Federal Deposit insurance Corp. and Federal Reserve announced they had been convinced by the bank’s plan for simplifying its structure and taking steps to ensure that certain critical services would continue to work for different arms of the financial institution during a failure.
“WFC has demonstrated that its legal entity rationalization criteria are clear, actionable, and promote the best alignment of legal entities and business lines to improve the firm's resolvability given the film's bridge bank strategy,” the regulators said in a letter to Wells Fargo CEO Tim Sloan.
“WFC has incorporated the mapping of critical services into its legal entity rationalization criteria and implementation efforts," the regulators said.
The news was a welcome victory in a tough year for Wells. “We are pleased with the agencies’ findings and remain committed to sound resolution planning and preparedness as we finalize our July 2017 submission,” the bank said in a statement.
In 2014, Wells Fargo was the only large U.S. bank in 2014 to receive a “credible” rating, or a pass, from the FDIC and Fed for its living wills. But after that, it fell to the bottom of the pack.
Wells was among five large U.S. banks to fail when regulators gave out their scorecards for the 2015 plans last April. Then in December, it was the only one of its peers to fail on the corrected living wills it had been forced to re-submit to regulators.
The second failure, announced just a few months after the bank’s former chief executive John Stumpf stepped down amid the bogus-accounts scandal, came with restrictions on the bank’s growth in international and nonbank activities.
In their December feedback, the FDIC and Fed had indicated that the bank had only made progress in one of three deficiencies that had been highlighted in the original living will. Though Wells had successfully addressed the issue of governance — or how the bank would ensure executives would initiate the bankruptcy process in time — it had not sufficiently explained how it would simplify its structure and keep critical services running during a failure.
Wells Fargo was then forced to submit a third version of the plan in March. The revised blueprint “adequately remediated the remaining deficiencies,” regulators said in a statement. Wells Fargo and the other large U.S. banks will have to submit new plans by July 1.