If it is still not acceptable, the regulators will limit the size of Wells Fargo's non-bank and broker-dealer assets to levels in place at the end of September.
The announcements Monday by regulators followed fraud and misconduct allegations raised last week in a whistle-blower lawsuit claiming the insurer covered up an internal inquiry that found San Francisco-based Wells Fargo may have fraudulently opened Prudential's low-priced MyTerm policies.
US officials on Tuesday limited Wells Fargo & Co's WFC.N ability to grow its business, punishing the bank for not having a sufficient plan to protect markets in the case of bankruptcy. In April, the Federal Reserve and the Federal Deposit Insurance Corp. gave Wells Fargo and four other banks until October 1 to correct deficiencies in their 2015 wills.
Wells Fargo is one of eight leading banks that must outline how they would be unwound in an orderly way in bankruptcy. As such, the agencies issued joint letters to these firms detailing the deficiencies in their plans and the actions the firms must take to address them, basically saying the banks were required to prove to the government they are not "too big to fail". On Tuesday, The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board announced that Bank of America, Bank of New York Mellon, JP Morgan Chase, and State Street adequately remediated deficiencies in their 2015 resolution plans, while Wells Fargo did not adequately remedy all its deficiencies.
It's unrelated to the scandal that stemmed from Wells Fargo employees opening of millions of unauthorized accounts in order to meet aggressive sales targets.
Chief Executive Officer John Stumpf resigned in the wake of that controversy. "We anticipate reviewing this matter with our regulators in due course", Hoffman said in a statement. If the bank doesn't meet the goal by March 31, an additional curb will be imposed limiting the size of its nonbank and brokerage assets to levels in effect on September 30. However, the company was informed today that it did not adequately remediate certain deficiencies.
The Fed and the FDIC said Wells Fargo did not remedy two out of three areas of concern: "legal entity rationalization" and "shared services".
The bank said it "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". "While we are disappointed with the determination issued by the agencies, we continue to be dedicated to sound resolution planning and preparedness", it further said.