Wells Fargo & Co. has been penalized by the Federal Reserve and Federal Deposit Insurance Corp. (FDIC) for flunking the so-called “living will” test, the first-time regulators imposed sanctions under the provision. The living will test, a requirement of Dodd-Frank, requires banks to plan how they deal with cataclysmic failures without taxpayer bailouts.

Regulators are uncomfortable with Wells Fargo’s plan, in which multiple units are placed under bankruptcy protection, or operate on their own. The typical model used by the other large banks (which passed regulatory scrutiny) puts the institution’s holding company under bankruptcy protection, and sells off individual units, or has them operate separately.

Regulators also indicated that Wells Fargo didn’t devote enough resources to the test, or make necessary changes to its approach, especially compared to other banks. As a result, Wells Fargo is barred from creating new international banking units, or acquiring non-bank subsidiaries. The bank has until March 2017 to develop a new plan.

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