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From Banking and Finance Law Daily, April 06, 2018

FSOC to consider nonbank financial company designations, Zions application

By Andrew A. Turner, J.D.

The Financial Stability Oversight Council is set to consider potential amendments to interpretive guidance for nonbank financial company designations, a potential application for an exemption from designation as a systemically important financial institution, and an update on the annual reevaluation of the designation of a nonbank financial company (the classification of Prudential Financial, Inc.). Secretary of the Treasury Steven Mnuchin will preside over the FSOC meeting on Thursday, April 12, 2018.

The potential application under discussion appears to relate to an announcement by Zions Bancorporation that it intended to file an application with the FSOC, in connection with a proposed restructuring, to eliminate "enhanced" regulation of the company as a systemically important financial institution. As discussed in its annual Form 10-K filing with the Securities and Exchange Commission, the proposal to streamline corporate structure would merge the parent bank holding company into its bank subsidiary, ZB, N.A. If completed, the proposed restructuring would eliminate the bank holding company structure and associated regulatory framework and would result in ZB, N.A. becoming the top-level publicly-traded entity within the company’s corporate structure.

In November 2017, the Treasury Department issued its report on FSOC’s SIFI designation process and provided recommendations on ways to improve FSOC’s processes for nonbank financial companies. The report identified five policy goals that should be achieved by FSOC’s designation processes: leveraging the expertise of primary financial regulatory agencies; promoting market discipline; maintaining a level playing field among firms; appropriately tailoring regulations to minimize burdens; and ensuring FSOC’s designation analyses are rigorous, clear, and transparent (see Banking and Finance Law Daily, Nov. 17, 2017).

Companies: Prudential Financial, Inc.; ZB, N.A.; Zions Bancorporation

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