What is a resolution plan or 'living will'?

A resolution plan, often referred to as a 'living will,' is a document that large financial institutions are required to submit to regulators. It outlines how the firm could be resolved in an orderly manner in the event of severe financial distress or bankruptcy, with minimal disruption to the financial system.

What are the immediate consequences of the inadequate resolution plan?

The immediate consequences are that Wells Fargo is restricted from establishing any new foreign banks or foreign branches and from acquiring any nonbank subsidiaries until the regulators are satisfied with the revised plan.

What are the potential future consequences if Wells Fargo fails to fix the issues?

If Wells Fargo fails to submit an adequate revised plan by March 31, 2017, its nonbank and broker-dealer assets could be limited to September 30, 2016 levels. If the deficiencies are not resolved by December 13, 2018, regulators may force the company to divest certain assets or operations.

When does Wells Fargo need to submit its revised plan?

Wells Fargo is required to submit a revised resolution plan that adequately remedies the identified deficiencies by March 31, 2017.

WELLS FARGO & COMPANY/MN 8-K SEC Disclosure

Summary

Wells Fargo & Company (WFC) announced on December 13, 2016, that the Federal Reserve Board and the FDIC determined its 2016 resolution plan (or "living will") submission was inadequate in addressing two of three deficiencies from its 2015 plan. This determination triggers immediate restrictions, prohibiting WFC from establishing new foreign banks or branches and acquiring nonbank subsidiaries until the deficiencies are remedied. Investors should be aware of the potential for further, more severe penalties if WFC fails to submit an adequate revised plan by March 31, 2017. These penalties could include limiting the size of its nonbank and broker-dealer assets to September 30, 2016 levels. Furthermore, failure to rectify the issues by December 13, 2018, could result in WFC being required to divest certain assets or operations, impacting its strategic growth and operational scope.

Key Highlights

1Wells Fargo's 2016 resolution plan was found inadequate by the Federal Reserve and FDIC.
2Two specific deficiencies from the 2015 plan remain unresolved.
3WFC is prohibited from establishing new foreign bank operations or acquiring nonbank subsidiaries, effective immediately.
4A revised resolution plan addressing the deficiencies is due by March 31, 2017.
5Failure to submit an adequate revised plan by the deadline could lead to limitations on nonbank and broker-dealer asset size.
6Potential for forced divestiture of assets or operations by December 13, 2018, if deficiencies persist.
7The company acknowledges uncertainty regarding its ability to satisfy regulatory requirements within the specified timeframes.

WELLS FARGO & COMPANY/MN 8-K Report, Corporate Update (Dec 14, 2016)

Summary

Key Highlights

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