Regulatory oversight panel favors not tagging Utah-based bank ‘systemically important’

A $66 billion Utah-based bank would not be considered “systemically important” to the U.S. financial structure under federal banking rules following the bank’s merger with its parent company, under a proposed decision reached Wednesday by a committee of regulators.

If the decision is made final, the bank would no longer be subject to regulation by the Federal Reserve, but instead the Office of the Comptroller of the Currency (OCC).

The Federal Stability Oversight Council (FSOC) made the proposed decision to grant an appeal by ZB NA (also known as Zions); a final decision must be made within 60 days, but that deadline is subject to “potential extension.”

ZB (based in Salt Lake City), according to FSOC filings, is a wholly owned subsidiary bank of Zions Bancorporation, also of Utah. ZB has entered into an agreement with Zions Bancorporation in which Zions Bancorporation will “merge with and into ZB.” On completion of the merger, the FSOC filings state, ZB will “succeed to all the assets and liabilities of Zions Bancorporation.”

ZB had petitioned FSOC that, following the merger, the bank not be treated as a nonbank financial company that FSOC has determined shall be supervised by the Federal Reserve.

If the FSOC decision is made final, Zions reportedly would be the first firm to take advantage of the power of FSOC to exempt banks from “systemically important” requirements imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). In this case, Zions would shed its Federal Reserve-regulated holding company, and then secure a ruling from FSOC that the bank isn’t “systemically important” to the U.S. financial system.

Going forward, Zions would be regulated by the Office of the Comptroller of the Currency (OCC).

In a statement released by FSOC Chairman (and Treasury Secretary) Steven Mnuchin, the council “found that there is not a significant risk that Zions could pose a threat to U.S. financial stability.” The decision was unanimous, according to the statement.

The FSOC statement noted that if the council makes a final decision to grant the bank’s appeal, ZB will not be treated as a “designated nonbank financial company upon completion of ZB’s proposed merger with its parent bank holding company, Zions Bancorporation.”

According to a table contained in the FSOC proposed decision, Zions Bancorp is listed no. 40 of the “Systemic Importance Scores Under the Basel Methodology.”

Financial Stability Oversight Council Announces Proposed Decision to Grant Petition from ZB, N.A.