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.
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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.
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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.
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(END) Dow Jones Newswires
April 24, 2017 18:28 ET (22:28 GMT)