The chairman and CEO of the smallest bank holding company to be designated as a systemically important financial institution yesterday outlined to the House Financial Services Committee the burdens this level of regulation has imposed — burdens he finds out of proportion to the benefits they provide.
Former ABA Chairman Harris Simmons, chairman and CEO of the $58 billion Zions Bancorporation, jokingly described his BHC — which owns seven mid-sized and community banks — as “the itty-bitty SIFI,” adding that even its own regulators belief that Zions is not of “the size, complexity nor critical importance to the workings of the U.S. economy to warrant the scope, intensity and cost of additional regulation that the automatic designation as a SIFI carries with it.”
Participating in this year’s capital exercises for the largest bank holding companies cost Zions $20 million in direct expenses, while software to comply with incentive compensation rules for SIFIs cost $3 million and outside expenses related to preparing a resolution plan is expected to cost $3 million, Simmons said — none of which includes the value of staff time. Zions has also hired nearly 500 full-time compliance, audit and risk management staff to handle increased burdens. Simmons projected that Zions will spend over $200 million on new core software and platforms to comply with stress test and liquidity management expectations for SIFIs.
“There is no apparent analytical foundation for the Dodd-Frank Act’s establishment of a $50 billion asset size threshold for the determination of an institution’s systemic financial importance,” Simmons said, noting that a $70 billion bank is exempt from SIFI status because it is not owned by a BHC, and that the largest credit union — Navy Federal, with $67 billion in assets — is likewise exempt. ABA supports bipartisan measures in both houses of Congress that would remove arbitrary asset thresholds for SIFIs and instead base SIFI status on risk profile and business model.