Wells Fargo failed the feds’ “living wills” test Tuesday afternoon, as federal regulators decreed that the bank would hurt financial markets if it were driven to the brink of bankruptcy.
The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) agreed earlier this year that five major banks, including Wells Fargo, failed to demonstrate a clear path to an orderly failure under bankruptcy at no cost to taxpayers.
BREAKING: Wells Fargo fails its ‘living wills’ test, is now prohibited from international expansion and acquiring non-banks – regulators
— Reuters Business (@ReutersBiz) December 13, 2016
“Living wills,” is a requirement under Dodd-Frank that is meant to keep large financial institutions from failing and devastating the U.S. economy.
Regulators determined Tuesday afternoon that Wells Fargo had again failed to provide an adequate outline for “living wills.” The FDIC slapped the largest American bank with two sanctions: the bank cannot establish international bank entities or acquire non-bank subsidiaries.
Wells Fargo is allowed to submit another living wills outline to federal regulators March 31.
The federal government originally agreed to a $185 million dollar settlement after Wells Fargo was found guilty of opening more than two million bank accounts without customer consent. (RELATED: Wells Fargo Just Got Hit With The Biggest Fine In CFPB History)
Wells Fargo management initially responded to the crisis by firing 5,300 employees associated with the scandal, but these surface changes were not enough for customers or lawmakers.
Former Chairman and CEO John Stumpf faced congressional investigation and a grilling from Senate leadership. Following the congressional hearings, the Wells Fargo board ordered Stumpf to cough up $41 million in assets and earnings he accrued from his decades-long tenure at the bank. The board also cut some mid-level management. (RELATED: Wells Fargo Investors Want Company Board To Do More)
Stumpf announced he was stepping down as chairman and CEO Oct. 12.
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