Zions bank becomes first victim of Volcker ruling

17 December 2013

Small Utah-based bank Zions Bancorp has become the first victim of the new Volcker financial ruling.

The bank revealed that it will no longer be able to hold some types of securitised debt as it implements measures to comply with the new regulations.

The rule, named after the former Federal Reserve chairman Paul Volcker, bans banks from using their own funds for trading activities.

Zions revealed it will no longer keep trust-preferred collateralised debt obligations (CDOs) issued by banks and insurers until they mature.

Utah's biggest lender has now marked these assets to market value, triggering a $387 million charge to earnings.

Zions estimated that reclassifying its portfolio of CDOs to AFS will result in tier one common equity ratio falling from 10.47 to 9.74 per cent.

The Zions situation has raised concerns that the Volcker rule could lead to smaller banks facing significant compliance costs.

By Claire Archer

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