WASHINGTON (Reuters) - A U.S. regulatory panel gave final approval on Wednesday to ease oversight of Zions Bancorp (ZION.O) after the Utah bank simplified its operations, deciding that the bank no longer should be classified as potentially posing a threat to the financial system.
The Financial Stability Oversight Council decided to no longer designate the bank as a “systemically important financial institution” (SIFI), freeing it from stricter scrutiny by the Federal Reserve.
The move to remove the designation, which followed preliminary approval by the FSOC in July, could mark the beginning of a concerted effort by regulators to ease oversight of all but the nation’s largest banks.
The regulatory panel, which is chaired by the Treasury secretary and charged with monitoring broad threats to the financial system, has the ability to identify firms as systemically significant, subjecting them to stricter oversight, including stronger capital rules.
That power was given to regulators as part of the 2010 Dodd-Frank financial reform law passed in the wake of the financial crisis, which automatically labeled banks with over $50 billion in assets as SIFIs. A new law approved by Congress in May raised that threshold to $250 billion.
Banks under $100 billion were immediately relieved of systemic status. The Federal Reserve has until November 2019 to reduce oversight of banks under $250 billion, which carves out all but roughly a dozen of the nation’s biggest banks. Zions had asked regulators for relief before Congress increased the SIFI threshold.
The Fed reserves the ability to more closely scrutinize smaller banks under the new law.
Zions has roughly $65 billion in assets. It solicited less stringent regulatory treatment after announcing plans to shed its bank holding company and simplify its structure.
Wednesday’s vote finalizes the FSOC’s preliminary approval, pending the completion of Zions’ merger with its holding company.
Reporting by Pete Schroeder; Editing by Leslie Adler