Wells Fargo Prohibited From International Expansion, Non-Bank Acquisition

Zachary BarrettDec 15, 2016

Plaintiffs consistently flagged potential fraud unearthed during the investigation - including "a large number of similarities between how Wells Fargo Bank opened fraudulent bank accounts and how the MyTerm Policies were being sold through Wells Fargo Bank" - but their concerns were rebuffed numerous times by upper management, the complaint says.

Since bankers are not licensed to sell insurance, Wells Fargo employees were meant to direct customers to either self-service kiosks in branches or online to buy the insurance, without getting into specifics about the products.

Wells Fargo spokesman Mark Folk declined to name the Wells Fargo partner that sells renter's insurance, but the bank's website indicates it offers the policies through Assurant.

It now has until the end of March to submit another revised plan to fix the failings.

Wells Fargo is one of eight leading banks that must outline how they would be unwound in an orderly way in bankruptcy.

USA taxpayers had to prop up banks that were deemed "too big to fail" and Congress vowed that such a rescue would not happen again.

The allegations were detailed in a lawsuit filed last week by three Prudential employees who said the Newark, N.J. -based insurer, one of the largest in the USA, retaliated against them because they refused to help cover up complaints about the term-life policies, which were to have been sold at special kiosks in the banks or online.

Now Wells Fargo is on a strict and increasingly punitive shot-clock to get its house in order.

The Federal Reserve and FDIC ruled that Wells Fargo "did not adequately remedy all of its deficiencies" that were raised by regulators back in April for the 2015 living will plan.

"Living wills" were conceived in the wake of the 2008 financial crisis when the downfall of several Wall Street banks sent shockwaves through global markets.

Regulatory officials said the action has nothing to do with the sales practice problems that Wells Fargo has gone through.

In a statement, Wells Fargo said it was "disappointed" with the regulators' latest findings. However, both firms have now passed their living will plans, unlike Wells Fargo.

"As we disclosed in our public filing in October, we believe that we substantially enhanced our capabilities in each of these areas identified". However, the company was informed today that it did not adequately remediate certain deficiencies.

Wells Fargo will now need to resubmit its living will and if it doesn't pass a next exam on March 31, 2017, the bank will be constrained from growing assets and its broker dealer operation.

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