On Monday, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board announced that Wells Fargo had remedied the deficiencies in its 2015 resolution plan. Wells Fargo will no longer be subject to the growth restrictions which were imposed last year.
The Dodd-Frank act requires resolution plans, commonly known as “living wills” which describe the company’s strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company. The FDIC and the Federal Reserve Board found that in December 2016, Wells Fargo had not yet remedied two of the three deficiencies the agencies had previously identified.
Subsequently, the agencies imposed restrictions on the growth of Wells Fargo’s international and non-bank activities. The revised plan submitted by Wells Fargo in march adequately repaired the two deficiencies.
“Earlier today, the Federal Reserve and the FDIC announced that Wells Fargo’s Revised Submission adequately remedied the remaining deficiencies,” said Wells Fargo in a statement. “We are pleased with the agencies’ findings and remain committed to sound resolution planning and preparedness as we finalize our July 2017 submission.”
By July 1, Wells Fargo must file a new resolution which will address vulnerabilities to orderly resolution as noted in guidance issued by the agencies last year. If the vulnerabilities noted in the guidance are not satisfactorily addressed, the agencies may jointly determine that the plan is not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code. The determination made Monday by the agencies pertains solely to Wells Fargo's 2015 resolution plan and not to any future resolution plan.
According to the FDIC, “the decision received unanimous support from the FDIC and Federal Reserve boards.”