Wells Fargo living will gets initial approval by regulators

WASHINGTON

The Federal Reserve and Federal Deposit Insurance Corp. told Wells Fargo on Tuesday that its living will can work with some revisions. The plans, a requirement of the Dodd-Frank Act, are meant to show a big bank can fail without threatening the broader financial system. Regulators rejected proposals submitted by 11 other lenders earlier this year.

If San Francisco-based Wells Fargo fixes "specific shortcomings" before submitting its next plan, it "could reduce the risk that the company's failure would pose to the stability of the U.S. financial system," the agencies said in a joint statement.

In August, the regulators said plans from 11 banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. fell short. The agencies told the lenders to make changes before July 2015, the next deadline for submitting wills.

The living-will process was among key Dodd-Frank measures meant to ward off a repeat of the 2008 financial crisis and assure the public that banks aren't "too big to fail." Regulators separated lenders into tiers based on their size and complexity, and banks must have their plans approved every year.

In its plan — a step-by-step guide for unwinding the company — Wells Fargo said it would seek to sell units and place others in bankruptcy if needed. Ancel Martinez, a Wells Fargo spokesman, declined to comment Tuesday.

In denying earlier plans of other banks, the agencies told lenders to develop less-complex legal structures, amend financial contracts for derivatives and provide regulators more time to resolve failing institutions.