Zions Bank fails to pass Federal stress test

SALT LAKE CITY — One of Utah's largest banking institutions is the only large bank in the nation that did not meet the minimum standards for financial capital levels set by the Federal Reserve in the event of a major economic meltdown.Zions Bancorp was the only bank of 30 tier-1 large institutions reviewed that did not meet the Dodd-Frank Wall Street Reform and Consumer Protection Act stress test lowest guidelines.The Federal Reserve announced the results of the bank stress tests on Thursday in an effort to determine whether the largest banking institutions in the U.S. were collectively better positioned to continue to lend to households and businesses and to meet their financial commitments in a catastrophic economic downturn than they were five years ago.Despite the less-than-flattering outcome for Zions Bancorp, Bob Allen, professor of accounting in the David Eccles School of Business at the University of Utah, said the results should not be taken as an indictment of the institution.“Zions isn’t the first bank to ever not pass a stress test,” he said. “There are other well-respected that have fallen below (the minimum) level in other stress tests.”But Allen acknowledged the importance of such exams in helping regulators and bank managers monitor the health of the institutions.“We do need to be prepared for scenarios that are somewhat unexpected,” Allen said, adding that such preparation will help prevent more economic turmoil in the event of a downturn.Allen said Zions Bank customers should not feel concerned about the safety of their accounts at the institution, despite the results.“It’s a solid bank,” he said. “They have a long-standing record of terrific bank management.“Allen lauded the usefulness of such stress tests in helping to ensure the stability of the nation’s financial institutions, particularly in the wake of the Great Recession.While Zions Bancorp yielded a less-than-favorable outcome in the stress comparability review, the company has been able to address the perceived deficiencies over the past several months and upgrade its standing, said Harris Simons, Zions Bancorp chairman, president and CEO.“Our risk profile has improved,” he told the Deseret News Friday.

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