Bank Grapples With CDOs in Light of Volcker Rule

Zions Bancorporation, the nation's largest holder of bank-issued trust-preferred CDOs, must reduce portfolio by about $387 million because of newly finalized Volcker Rule.

Zions Bancorporation, Utah’s biggest lender, said the new Volcker Rule forces the company to get rid of some prohibited holdings at a cost of about $387 million.

The bank can no longer keep trust-preferred collateralized debt obligations (CDOs) issued by banks and insurers until they mature, the Salt Lake City-based firm said today in a statement. Other asset-backed CDOs are included in the non-cash charge, which Zions said may be bigger or smaller depending on how sales mandated by the Volcker Rule affect prices.

All banks may not interpret the Volcker Rule the same way, according to Jason Goldberg, an analyst at Barclays Plc.

“There’s a lot of pages,” Goldberg said in an interview. “It’s going to take some time to figure this all out.”

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