Zions Seeks To Simplify Structure To Remove Regulatory Tag
Zacks Investment Research | Nov 20, 2017 08:56PM ET
With the aim of simplifying corporate structure and streamlining business operations, Zions Bancorporation (NASDAQ:ZION) intends to merge its parent company into its banking subsidiary. With this move, the holding company will be eliminated and the resulting banking organisation will continue to operate with its existing name.
Once the corporate structure is simplified, Zions will be eligible to file an application with the Financial Stability Oversight Council ("FSOC") seeking to get the "systemically important" regulatory label removed from its name.
According to the provisions contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act, banks, which have more than $50 billion in assets, are considered systemically important financial institutions (SIFI). The SIFIs have to abide by various capital requirement rules and there is a lot of scrutiny that this regulatory label carries with itself. This is because failure of any of these companies can pose a threat to the global financial system.
Notably, among the various companies within the group like Bank of America (NYSE:BAC) Corporation (NYSE:C) , JPMorgan Chase & Co. (NYSE:JPM) , Citigroup Inc. (NYSE:C) and many others, Zions is the smallest, with assets of nearly $65 billion as of Sep 30, 2017. Zions, which operated as a multi-bank holding company earlier, has been taking a number of initiatives to consolidate its several branches. In 2015, it consolidated its seven subsidiary banks into a single national bank charter.
Zions’ chairman and CEO, Harris H. Simmons, said, “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 'systemically important' appellation, and we are optimistic that the FSOC will arrive at that conclusion as well.”
Thus, Zions is expected to file the documents related to this move by the end of the year. Assuming that things will go in its favour, Zions expects the process to be completed within six months from the time of filing the request with the FSOC.
Moreover, if things go as planned, Zions’ compliance costs will likely decrease due to lesser regulatory restrictions. This will likely aid bottom-line growth in the quarters ahead.
Zions’ shares have gained 9.4% so far this year, outperforming the 4.2% growth for the Original post
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