American International Group Inc. (AIG) and General Electric Co.'s (GE) GE Capital unit won't appeal their designations as "non-bank systemically important financial institutions," setting them up for additional oversight from U.S. regulators.
The Financial Stability Oversight Council, led by the Treasury Department, voted last month to designate the two companies, along with Prudential Financial Inc. (PRU), as "systemically important," starting a 30-day clock for the companies to challenge the designation. Without a challenge from the companies this week, FSOC is required to vote again on the matter to finalize the designations within 40 days of the initial determination.
A spokesman for GE confirmed the company's plan to let the designation stand. A person familiar with AIG confirmed that company's plans. A spokesman for Prudential had no immediate comment on whether the company planned to challenge its designation.
If the SIFI designation is finalized, the three companies would join several massive banks that have earned the systemically important label, including Citigroup Inc. (C), J.P. Morgan Chase & Co. (JPM) and Bank of America Corp. (BAC), and a handful of payment and clearing firms. Any company designated as systemically important could be subject to higher capital levels and regular "stress tests" to ensure they can absorb losses, though the specific capital rules for insurers are far from complete.
A spokesman for GE Capital said the company has "been prepared for this expected designation ... Accordingly, we have decided not to appeal or ask for a hearing. GE Capital is safe and secure. We have been and will be prepared to meet the requirements for SIFIs."