Regulatory Matters

12 Months Ended

Dec. 31, 2016

Regulatory Capital Requirements [Abstract]

Regulatory Matters

18. REGULATORY MATTERS

We are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Required capital levels are also subject to judgmental review by regulators.

The Basel III capital rules, which effectively replaced the Basel I rules, became effective for the Company on January 1, 2015 (subject to phase-in periods for certain of their components). In 2013, the FRB, FDIC, and Office of the Comptroller of the Currency (“OCC”) published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implemented the Basel Committee’s December 2010 framework, commonly referred to as Basel III, for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The Basel III capital rules substantially revised the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company, compared to the Basel I U.S. risk-based capital rules.

Under prior Basel I capital standards, the effects of AOCI items included in capital were excluded for purposes of determining regulatory capital and capital ratios. As a “non-advanced approaches banking organization,” we made a one-time permanent election as of January 1, 2015 to continue to exclude these items, as allowed under the Basel III Capital Rules.

Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the following schedule) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As of December 31, 2016, all capital ratios of the Company and its subsidiary bank exceeded the “well-capitalized” levels under the regulatory framework for prompt corrective action. Dividends declared by our subsidiary bank in any calendar year may not, without the approval of the appropriate federal regulators, exceed specified criteria.

Appropriate capital levels and distributions of capital to shareholders for the Company and other “systemically important financial institutions” are also subject to annual “stress tests” performed as a part of the Federal Reserve’s CCAR process.

The stress tests seek to comprehensively measure all risks to which the institution is exposed, including credit, liquidity, market, operating and other risks, the losses that could result from those risk exposures under adverse scenarios, and the institution’s resulting capital levels. These stress tests have both a qualitative and a quantitative component. The qualitative component evaluates the robustness of the Company’s risk identification, stress risk modeling, policies, capital planning, governance processes, and other components of a Capital Adequacy Process. The quantitative process subjects the Company’s balance sheet and other risk characteristics to stress testing and independent determination by the Federal Reserve using its own models. Most capital actions, including for example, payment of dividends and repurchasing stock, are subject to non-objection by the Federal Reserve to a capital plan based on both the qualitative and quantitative assessments of the plan.

Because the Company’s subsidiary bank has assets greater than $10 billion also it is subject to annual stress-testing and capital-planning processes examined by the OCC, known as the Dodd-Frank Act Stress Test (“DFAST”).

The actual capital amounts and ratios at December 31, 2016 and 2015 for the Company and its subsidiary bank under Basel III are as follows:

	December 31, 2016				To be well-capitalized
(In thousands)	Amount		Ratio		Amount		Ratio
Transitional Basis Basel III Regulatory Capital Rules
Total capital (to risk-weighted assets)
The Company	$	7,608,502	15.24	%	$	4,993,671	10.00	%
ZB, National Association	7,277,987		14.61		4,983,000		10.00
Tier 1 capital (to risk-weighted assets)
The Company	6,737,638		13.49		3,994,937		8.00
ZB, National Association	6,654,990		13.36		3,986,400		8.00
Common equity tier 1 capital (Basel III)
The Company	6,028,037		12.07		3,245,886		6.50
ZB, National Association	5,824,090		11.69		3,238,950		6.50
Tier 1 capital (to average assets)
The Company	6,737,638		11.09		na		na 1
ZB, National Association	6,654,990		10.99		3,027,427		5.00

	December 31, 2015				To be well-capitalized
(In thousands)	Amount		Ratio		Amount		Ratio
Transitional Basis Basel III Regulatory Capital Rules
Total capital (to risk-weighted assets)
The Company	$	7,535,760	16.12	%	$	4,674,725	10.00	%
ZB, National Association	6,918,312		14.84		4,661,581		10.00
Tier 1 capital (to risk-weighted assets)
The Company	6,580,326		14.08		3,739,780		8.00
ZB, National Association	6,334,391		13.59		3,729,265		8.00
Common equity tier 1 capital (Basel III)
The Company	5,711,836		12.22		3,038,571		6.50
ZB, National Association	5,503,491		11.81		3,030,028		6.50
Tier 1 capital (to average assets)
The Company	6,580,326		11.26		na		na 1
ZB, National Association	6,334,391		10.97		2,886,732		5.00

¹  There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.

Zions is also subject to “capital conservation buffer” regulatory requirements. When fully phased-in on January 1, 2019, the Basel III Capital Rules will require the Company and its subsidiary bank to maintain a 2.5% capital conservation buffer, designed to absorb losses during periods of economic stress, composed entirely of Common Equity Tier 1 (“CET1”), on top of the minimum risk-weighted asset ratios, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases, and compensation. The implementation of the buffer will be phased-in beginning January 1, 2016 at the 0.625% level and increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019. Zions’ triggers and limits under actual conditions and baseline projections are more restrictive than the capital conservation buffer requirements.