(Reuters) - Zions Bancorp on Monday said it would become the first bank to attempt to shake off its “systematically important” regulatory label, which carries with it heightened oversight and capital requirements.
Salt Lake City, Utah-based Zions announced plans to simplify its corporate structure by merging the parent company into its banking business. The move, which would eliminate its holding company that is regulated by the Federal Reserve, would also open the door to allow the bank to petition the Financial Stability Oversight Council (FSOC) to remove its “big bank” status that comes with heightened scrutiny.
James Abbott, the bank’s director of investor relations, said when Zions failed its government stress test in 2014, it kicked off a broader review of its structure and regulatory load.
“That was the catalyst that sort of led us to think about, does it make sense to consolidate charters?” he said in an interview with Reuters. “Why do we need to have a bank holding company? We’re a very, very simple bank.”
The systematically important financial institution (SIFI) designation is given by that regulatory panel to companies whose failure can pose a threat to the global financial system. Banks with over $50 billion in assets are automatically considered SIFIs, and Zions represents the smallest institution in that club with assets of roughly $65 billion.
The bank’s move to eliminate its holding company permits it to petition the FSOC to remove that label, which could come in roughly six months, according to the bank. It is likely the bank could get a friendly hearing from the panel. Its voting members are now mostly federal regulators put in place by President Donald Trump, who has vowed to trim bank regulations.
The FSOC has already removed SIFI designations from two nonbanks - American International Group and General Electric’s finance arm, GE Capital. And on Friday, the Treasury Department issued a report recommending the panel focus more on broader activities within the financial system, as opposed to scrutinizing specific firms.
"There is much evidence that a consensus exists among Washington policymakers that a straightforward regional bank of Zions' size and lack of complexity does not warrant the 'systematically important' appellation," Zion Chief Executive Harris Simmons said. (reut.rs/2zWQzsE)
Abbott said the arrival of the Trump administration boosted the bank's efforts to seek relief from regulations. He welcomed a push in Congress to roll back banking rules enacted following the 2008 financial crisis. (reut.rs/2zXxEhw)
Reporting By Aparajita Saxena in Bengaluru and Pete Schroeder in Washington; Editing by Martina D'Couto and Andrew Hay