Wells Fargo scandal spreads to Prudential insurance

Dec 15, 2016, 00:17
Wells Fargo scandal spreads to Prudential insurance

Wells Fargo said it thinks it knows what it needs to do: "We believe we will be able to address the concerns raised today", the company said in a statement.

In October, Wells Fargo CEO Timothy Sloan took the reins of America's third largest bank by assets during a fake account scandal that cost the firm's former leader John Stumpf his job.

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

The plans are meant to allow the banks to be resolved under federal bankruptcy law.

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 in the future.

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 US, 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.

However, Wells Fargo's headache comes at a time when President-elect Donald Trump has promised to dismantle key parts of Dodd Frank.

The state of California has ordered an investigation into allegations Wells Fargo retail bankers signed up customers for life insurance policies from Prudential Financial without their permission.

The San Francisco bank's stock plunged this fall after it agreed to a $185 million settlement with federal and state regulators over the opening of unauthorized deposit and credit accounts by employees struggling to meet sales quotas.

Wells Fargo said it is "deeply concerned about these allegations as they are completely counter to our values".

"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.

New Jersey's regulator said earlier in the day that it was investigating the insurance sales, in a statement that didn't provide specifics.

According to the FDIC and the Federal Reserve, Wells Fargo is expected to file a revised submission addressing the remaining deficiencies by March 31, 2017.

"Wells Fargo is committed to strengthening and enhancing its resolution planning processes, and we will continue to work closely with the agencies to better understand their concerns so that we can bring our resolution planning processes in line with their expectations", Wells Fargo concluded. "While we are disappointed with the determination issued by the agencies, we continue to be dedicated to sound resolution planning and preparedness", it further said.

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