Wells Fargo Says New Risk Rule Prompts Sale of Ex-Wachovia Asset

Wells Fargo & Co. said it sold an asset with a “punitive risk weighting” in the third quarter to help boost its capital ratio under new international standards.

The structured asset inherited from Wachovia Corp. was worth a “few billion dollars,” Tim Sloan, chief financial officer of the San Francisco-based bank, said in an interview today. Wells Fargo sold the asset because the amount of capital needed to back it wasn’t worth the return, he said. The asset was kept at the holding company and was performing, he said.

U.S. banks have been disposing of riskier assets and winding down businesses to comply with rules proposed by the Basel Committee on Banking Supervision designed to head off another global credit crisis. Wells Fargo said its Basel III Tier 1 common equity ratio, which measures equity divided by assets adjusted for risk, stood at 9.54 percent when it reported third-quarter results today.

“Once the rules were finalized, we looked at it and said from a risk-return standpoint, let’s just sell this and let’s just move on,” Sloan said. “It’s not like we have 10s and 20s of billions of dollars of things like that lying around.”

Wells Fargo outbid Citigroup Inc. to buy Wachovia five years ago after the North Carolina-based lender all but collapsed during the 2008 financial crisis. Wells Fargo is the biggest U.S. home lender and the most valuable domestic bank by market value.

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