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Wells foul of Dodd Frank again

In April, regulators announced that they had rejected the living will plans proposed by Wells Fargo and four other major banks

Wells Fargo has run afoul of banking regulators once again: on 13 December, for the second time this year, the bank did not pass a key regulatory test that was created after the 2008 financial crisis to reduce the threats that large banks pose to the broader economy.

In April, regulators announced that they had rejected the “living will" plans proposed by Wells Fargo and four other major banks. Each bank had been required to submit a plan to unwind itself in a way that would safeguard the economy in case of the bank’s failure. Since then, all five banks have resubmitted their disaster-preparedness plans; only Wells Fargo’s plan did not pass muster.

Because of the continuing problems with Wells Fargo’s plan, the Federal Reserve and the Federal Deposit Insurance Corp. will prohibit it from establishing new international units or acquiring a subsidiary that is not a bank.

Those penalties can be lifted if Wells Fargo fixes its plan by 31 March. Wells has until then to submit its plan a third time; if the problems linger too long, regulators could place additional limits on the company.

For instance, the bank could be forced to start selling assets in certain units, including at its brokerage arm. In a statement on 13 December, Wells Fargo said it believed it had already addressed the areas with which regulators had found fault. “We will continue to work closely with the agencies to better understand their concerns so that we can bring our resolution process in line with their expectations," the bank said.

Regulators said the issue with Wells Fargo’s plan was not related to its huge sham accounts fraud, which has plunged the bank into turmoil since September.

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