SALT LAKE CITY — Zions Bancorporation wants to shed its federal classification as a big bank, a designation it unwillingly assumed in the wake of the Great Recession.
The Salt Lake City-based bank, which has $65 billion in assets and operates in 11 Western states, was swept into the regulatory tier of the nation’s biggest banks after the Dodd-Frank Act of 2010 was enacted. It now wants to be the first bank of its size to lose the label of “systemically important,” a classification that puts Zions on par with financial goliaths such as Bank of America and JPMorgan Chase & Co.
If the change is approved by the Financial Stability Oversight Council of the Treasury Department, the bank will have fewer accounting and administrative costs and will be better able to serve its customers, Zions executive vice president Rob Brough said.
A call requesting comment from the Treasury Department was not immediately returned Monday.
Less than two years ago, Zions consolidated its affiliate banks under one charter, while maintaining its holding company. Now, in conjunction with its petition to the oversight council, the bank proposes to eliminate the holding company and consolidate its operations under a single charter bank, a plan Brough says benefits both customers and federal regulators.
“There’s no change in our products, there’s no change in our pricing; there’s no change in any way we service our customers. It really is just a change in our corporate structure,” Brough said.
Under the framework of Dodd-Frank, eliminating the holding company allows Zions to petition for reclassification. Zions anticipates that the federal approval of the change, if it comes, would take up to six months.
Financial analysts said Zions’ request is reasonable and likely to be approved under a presidential administration that has vowed to reduce federal regulation.
The Dodd-Frank Act, which tightened banking regulations, sought to correct problems that led to the 2008 failure of Lehman Brothers and the subsequent injection of billions of federal dollars into the nation's leading banks, which were famously dubbed "too big to fail."
The legislation lowered the threshold for big banks to $50 billion in assets, saddling Zions and other regional banks with regulations that governed banks with assets of $2 trillion and more, said Al Landon, an adjunct professor at the David Eccles School of Business at the University of Utah and a former banker.
“That’s a huge range. Zions Bank is at the smaller end of that range, and they were subjected to the same things that America’s largest banks were subjected to,” Landon said.
In 2014, Zions failed a stress test that federal regulators administer every year to assess the health of the big banks, but it has passed subsequent ones.
H. Rodgin Cohen, a New York corporate lawyer who specializes in banking, said few people would argue that Zions is “systemically important,” meaning that its failure would be a risk to the financial stability of the nation.
“Almost everybody agrees that the $50 billion threshold is just too low. People had to make decisions; there was a lot of pressure back in 2009 and 2010, and this was the decision they made," said Cohen, senior chairman of Sullivan & Cromwell.
“Enhanced supervision made sense; it’s just the line was drawn in the wrong place,” Cohen said.6 comments on this story
While Zions’ current classification as a “systemically important financial institution” — known as a “SIFI” (pronounced sif-fee) — is flattering, it’s an honor the bank is happy to relinquish, Brough said.
“We hope people would consider us systemically important to the Utah economy because of what we contribute and who we are," Brough said. "But we also acknowledge that from the nation’s financial standpoint, if something were to happen to Zions Bancorporation, I’m not certain that the U.S. economy would crumble.”