U.S. Regulators Sanction Wells Fargo, Declaring 'Living Will' Deficiencies

By Ryan Tracy and Emily Glazer 

WASHINGTON -- U.S. regulators slapped Wells Fargo & Co. with new regulatory sanctions Tuesday, saying the firm failed to address alleged "deficiencies" in a plan to manage its own bankruptcy without a taxpayer bailout.

Four other huge banks avoided the sanctions: J.P. Morgan Chase & Co., Bank of America Corp., Bank of New York Mellon Corp., and State Street Corp. The Federal Reserve and Federal Deposit Insurance Corp. announced the verdicts Tuesday after saying in April that the five banks didn't have adequate "living will" plans.

This the first time that regulators have imposed penalties since the country's biggest banks were required to submit "living wills" starting in 2012. Officials have been granted far-reaching powers to restrict bank activities under the program. In this case, Wells Fargo will be barred from establishing international bank entities or acquiring any non-bank subsidiary. The regulators could have but did not impose higher capital requirements on the firm, a potentially stricter sanction.

The regulatory shortcoming, akin to failing a makeup test, is yet another blow to Wells Fargo, which is still struggling with the fallout from its sales-practices scandal. The firm, once a golden child among big banks, paid a $185 million fine in September to a separate set of federal regulators, along with a city official, over opening as many as 2.1 million accounts with unauthorized or fictitious customer information.

Since then, Wells Fargo has faced public and political criticism. Former Chief Executive John Stumpf retired abruptly after being grilled in two congressional hearings. The bank faces many state and federal investigations, including from the Justice Department and the Securities and Exchange Commission. Wells Fargo's board is also conducting its own internal investigation. The Office of the Comptroller of the Currency last month imposed further restrictions on the bank's operations over that controversy, and is looking at still further restrictions on the bank's ability to expand.

--Christina Rexrode contributed to this article.

(END) Dow Jones Newswires

December 13, 2016 16:47 ET (21:47 GMT)

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