SALT LAKE CITY, Jan. 21, 2014 /PRNewswire/ -- Zions Bancorporation (Nasdaq: ZION) announced today that as a result of the issuance of an interim final rule ("IFR"), published by five federal regulatory agencies on January 14, 2014, a substantial majority of Zions' trust preferred securities ("TruPS") collateralized debt obligations ("CDOs") will remain permissible holdings under the final rule adopted under Section 619 of the Dodd-Frank Act (commonly referred to as the "Volcker Rule") and the IFR because they were invested primarily in "qualifying TruPS collateral."
Zions had previously announced on December 16, 2013 that it had expected the impact from the Volcker Rule on such CDOs to result in pre-tax accounting charges and that, pro forma as of September 30, 2013, such charges would have been approximately $629 million based on CDO balances as of December 15, 2013 and CDO valuations as of September 30, 2013. As a result of the IFR, Zions will not be required to change its accounting treatment and take impairment charges in the fourth quarter with respect to the CDOs that are primarily invested in collateral considered qualifying TruPS collateral. Zions does expect a moderate accounting charge in the fourth quarter of 2013 with respect to CDO securities that are not covered by the IFR and remain prohibited under the Volcker Rule.
Additionally, Zions expects to sell a portion of its total CDO portfolio as a part of its overall effort to manage risk. The market pricing of TruPS CDOs has materially improved in the past several months, and in particular during the fourth quarter. While the large majority of the securities Zions expects to sell could be retained under the IFR, these securities generally have higher regulatory risk weightings, and by reducing exposure to such assets, Zions' capital ratios under various stress test scenarios are materially stronger than if Zions held the assets. This also should position Zions to cancel the total return swap related to its CDO portfolio.