Following its impending merger, Zions Bankcorporation requested the Financial Stability Oversight Council not treat the bank holding company, as a nonbank financial company supervised by the Board of Governors of the Federal Reserve System ("Board of Governors"). The company argued, among other things that:

  • Any material financial distress at the company would not pose a risk to U.S. financial stability;
  • The company was relatively small, lacked complexity and had low levels of interconnectedness; and
  • The company was a source of credit for low interest, minority, and underserved communities.

The Council scrutinized the company and resolved that "if the company were to fail, its expected post-merger legal and operational structure does not appear to have features that would have the likelihood of a disorderly resolution that would pose a threat to U.S. financial stability."

In determining whether to grant the request, the Council considered the extent to which the company would be subject to regulation and supervision if it were not treated as a nonbank financial institution. It looked at: (1) whether regulators could impose capital and liquidity requirements; (2) whether regulators would have the authority to bring enforcement actions; (3) impose detailed and timely reporting obligations; (4) whether regulators would have the ability to dissolve the company; and (5) the existence and effectiveness of consolidated supervision. Finding there to be sufficient oversight and regulation, the Council granted the company's request to not be treated as a nonbank financial company post-merger.

FSOC has been criticized in the past for imposing "bank centric" requirements and analyses on insurance companies and other nonbank financial companies.  It remains to be seen whether the analysis in this decision, which focuses more than previous decisions on the activities at issue, marks a departure from the "bank centric" approach to FSOC's decision making with respect to nonbank financial companies.

Final Decision of the Financial Stability Oversight Council Regarding the Appeal of Zions Bankcorporation, September 12, 2018.

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