Zions no longer deemed 'too big to fail'

Zions Bancorporation has prevailed in its attempt to not be designated as a “systemically important financial institution,” or SIFI, thus relieving it from tighter federal regulation.

Salt Lake City-based Zions and the Financial Stability Oversight Council (FSOC) both announced last week that the council had granted Zions’ appeal from the SIFI designation.

The council had made a preliminary decision to grant the bank’s appeal on July 18.{mprestriction ids="1,3"}

“Zions engages in limited capital markets activities, presents minimal fire sale risks, uses a simple operational structure, and is subject to extensive regulation and supervision,” Treasury Secretary Steven T. Mnuchin said in a news release. “The council determined that there is not a significant risk that Zions could pose a threat to U.S. financial stability, and I am pleased that the council used its authority to promote regulatory efficiency.”

Zions said it had received the regulatory approvals to complete the merger of its holding company with and into its bank, ZB NA, with the resulting bank to be known as Zions Bancorporation NA. Zions was scheduled to have a special shareholder meeting last Saturday (Sept. 14) about the merger approval. If the shareholders approve the merger, it is expected to be completed as of Sept. 30.

“The merger is expected to result in the elimination of duplicative regulatory efforts, leaving the Office of the Comptroller of the Currency as the bank’s primary federal regulator,” Zions said.

As a result of the FSOC decision, ZB will not be treated as a designated nonbank financial company upon completion of its proposed merger with its parent bank holding company, Zions Bancorporation, the Department of Treasury said.

Zions had announced last November that it would streamline its corporate structure by merging the parent company into its banking subsidiary, ZB NA, or one of its subsidiaries. It said at the time that it would continue to operate with its existing local brand names and management teams in markets throughout the western United States. It announced at the same time its intention to file a petition with the FSOC to challenge its “systemically important” status.

The SIFI designation — known as “too big to fail” — is given by the FSOC to companies whose failure can pose a threat to the global financial system. Zions was the first bank to openly petition the FSOC to remove its SIFI designation.

Reuters said the removal of the designation in the Zions matter “could mark the beginning of a concerted effort by regulators to ease oversight of all but the nation’s largest banks.”

Zions has total assets of more than $65 billion and operates in 11 western states.{/mprestriction}