The Federal Deposit Insurance Corp. and Federal Reserve had said in December that the bank did not have an adequate plan to ensure it could be quickly dismantled and sold off — but continue operating — in the event of a bankruptcy.
Regulators specifically said the bank's living will did not simplify the company's legal structure and address how the different businesses could independently operate if the parent corporation was not able to provide support services.
In a letter to the company Monday, regulators said the revised plan submitted last last month addressed those concerns and that restrictions placed on the bank in December will now be lifted.
That includes a prohibition on establishing new international banking businesses or buying nonbank subsidiaries, such as wealth management firms. Had the bank's revised plan failed to get the OK from regulators, the bank could have faced additional sanctions, including caps on the size of certain businesses.
The bank must submit another update to its living will in a few months. The Dodd-Frank Wall Street Reform Act requires banks to submit these plans in the hopes that they will allow institutions to wind down in an orderly way — and without the need for taxpayer-funded bailouts.
"We are pleased with the agencies' findings and remain committed to sound resolution planning and preparedness as we finalize our July 2017 submission," the bank said in a statement.
Wells Fargo has faced increased regulatory scrutiny since September, when it agreed to pay $185 million to regulators over its practice of opening accounts for customers without their authorization.
In a research note Monday afternoon, analysts R. Scott Siefers and Brendan Nosal at investment bank Sandler O'Neill said the approval of the living will addresses one of several questions looming over the bank.
"At the least, this announcement checks off one box on the 'to do' list for both the company and its investors," they wrote. "While it may not have a big impact on the stock, it does eliminate what had become a company-specific uncertainty at a time when [Wells Fargo] was already dealing with the aftermath of last year's account opening scandal."
Still, other questions remain.
The bank remains under investigation by a handful of state and federal agencies, including the Department of Justice and the California attorney general's office, over unauthorized accounts. The bank has offered to pay $142 million to settle nearly a dozen consumer lawsuits related to those practices, though attorneys for some customers have dismissed that sum as far too small and say they plan to keep trying to fight the bank in court.
One remaining question — which should be answered at Tuesday's shareholder meeting — is the extent to which Wells Fargo investors blame the company's board of directors for the accounts scandal.
Investment advisory firms Glass Lewis and Institutional Shareholder Services have recommended that shareholders vote against several Wells Fargo board members, saying they failed to properly oversee the bank. ISS recommended voting against 12 of 15 board members, a move the board called "extreme an unprecedented."
It is a rare recommendation, but one that some investors are following, at least in part.
Both of California's major public pension funds, the California State Teachers' Retirement System and the California Public Employees' Retirement System, voted against nine board members. The two pension funds collectively own about 22 million shares, though that represents less than half of 1% of the bank's shares.
The New York State Common Retirement Fund, which owns more than 13 million Wells Fargo shares, also plans to vote against all but the bank's two newest board members — Karen Peetz and Ronald Sargent, who joined the board this year.
"The systemic breakdown that allowed these abuses to take place demands new leadership," New York State Comptroller Thomas DiNapoli said in a statement.
Not all shareholders are voting to oust the board, though.
Wells Fargo shares rose 65 cents Monday, or about 1.2%, to $53.65.
The announcement about the bank's living will came after markets closed. Shares climbed an additional 20 cents, or 0.4%, in after-hours trading.
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4:50 p.m.: This article was updated with comments from analysts at Sander O'Neill and details about shareholder votes at the company's annual meeting on Tuesday.