With execs in hot seat, Wells Fargo gets OK for bankruptcy plan

WASHINGTON: Retail banking giant Wells Fargo has fixed problems in its 2015 bankruptcy plan and will now be allowed to open new international branches, US banking regulators said.

The reprieve comes a day before a high-stakes shareholder meeting at which the bank’s board is facing a no-confidence vote.

Wells Fargo has struggled to right itself since September, when it reached a US$ 190 million settlement with federal authorities over its sham accounts scandal. The bank admitted to opening millions of accounts and moving money without customers’ permission. A Treasury Department agency found this month found the bank’s board as early as 2005 had received ‘regular’ reports that employee firings and internal ethics complaints were related to unethical sales practices.

But the bank has denied its board was aware of the hundreds of whistleblower complaints brought to the attention of officials at Treasury’s Office of the Comptroller of the Currency.

Monday’s announcement reversed an action taken by the Federal Reserve Board and Federal Deposit Insurance Corporation, which in December jointly found that Wells Fargo had failed to remedy problems in its 2015 bankruptcy plan.

As a result of the plan’s deficiencies, Wells Fargo was subject to restrictions on growth and operations, including opening new foreign branches.

The plan, or ‘ living will,’ is required of all large US banks to ensure that, in the event of bankruptcies, they can be dismantled in an orderly manner, helping avoid the kind of systemic collapses seen during the financial crisis of 2008.

The resolution plans are required under the 2010 DoddFrank Wall Street reform legislation, which President Donald Trump has pledged to significantly scale back.

Wells Fargo will have to file its next resolution plan by July 1, which will also be subject to review by regulators. — AFP