Wells Fargo writes its own will

Wells Fargo is prepared to file for bankruptcy and sell off parts of itself if it gets into a crisis, the bank says in a plan made public by U.S. regulators this week.

The bank’s blueprint is part of so-called living wills that U.S. financial institutions have been required to provide to regulators since the financial crisis.

Under the Dodd-Frank financial overhaul act, bank holding companies with consolidated assets of $50 billion or more must submit the wills. In the event of another downturn, the wills are supposed to show how the institutions could be dismantled.

This week, the Federal Deposit Insurance Corp. published the plans of Wells Fargo and three other financial institutions with $100 billion to $250 billion in U.S. nonbank assets apiece. Banks with more in assets had to submit their wills last year.

In its 25-page plan, Wells Fargo says its parent company would file for Chapter 11 bankruptcy protection and likely seek to reorganize itself. The company would also consider selling its remaining businesses or liquidate its assets.

Wells Fargo’s primary subsidiary, its national banking operation, would be subject to FDIC receivership. According to the bank’s plan, Wells Fargo has “a range of sale and disposition options for the FDIC to consider.” The plan calls for Wells Fargo to be maintained as a whole, transitioned to another owner or broken up into parts that could be sold.

Wells Fargo has “planned for the rapid and orderly resolution” of itself “without government intervention or taxpayer support,” the will says.

The portion of Wells Fargo's will published by the FDIC is only the public section of its plans. By law, some parts of banks’ living wills are kept confidential.

The living wills have been criticized. In a New York Times story last year, bank analyst Mike Mayo called them “simply an exercise to make some people feel better.”

Also in the story, Dwight Smith, a lawyer who specializes in bank regulation, said banks who wind up in a crisis would be challenged to find buyers.

“The theory of the living wills is that a failing institution could sell its subsidiaries to some other buyers,” he said. “But the truth is that there wouldn’t be an obvious buyer.”

Bank of America, along with other financial institutions that have $250 billion or more in U.S. nonbank assets, submitted it resolution plan last year. Such institutions must submit a second plan by Oct. 1.