Wells Fargo must raise $40 billion in debt to meet new regulation

As the third-largest bank in Central Florida, Wells Fargo & Co. must raise $40 billion in new debt to keep up with industry regulation. The Federal Reserve announced a new regulation at the end of the October, and it will impact the largest banks in the country. The idea of the new regulation is to prevent a government bailout of the country’s largest banks again, following the 2008 financial crisis. According to the Wall Street Journal, the regulation will ask banks to issue debt as another level of protection in case the institution runs out of capital.

John Shrewsberry, Wells Fargo’s chief financial officer, said at a conference last Friday the bank needs to issue $40 billion in long-term debt to reach the “total loss-absorbing capacity.” The debt issuance would be a relatively small portion of the bank’s liabilities, which stood at $1.56 trillion at Sept 30. Even with the debt issuance, Wells Fargo will be able to post modest growth in net interest income, a measure of profits from lending, in 2016 from 2015.

The issuance will help Wells Fargo to comply with new regulation; it also ensure that many of the largest U.S. banks have enough equity capital and long-term debt to withstand crises.

The Wall Street Journal

Lingfeng Zheng

Advertisements
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s