Financial Stability Oversight Council Makes First Nonbank Financial Company Designations

[Zorro]

The Financial Stability Oversight Council (Council) today announced that it had voted to designate two nonbank financial companies to address potential threats to financial stability. This is the Council’s first use of its authority under Title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) to subject a nonbank financial company to consolidated supervision and enhanced prudential standards.

The nonbank financial companies subject to final designations by the Council are:

• American International Group, Inc. (AIG)

• General Electric Capital Corporation, Inc. (GECC)

“Today, the Council has taken a decisive step to address threats to U.S. financial stability and create a safer and more resilient financial system,” said Treasury Secretary Jacob J. Lew, Chairperson of the Council. “These designations will help protect the financial system and broader economy from the types of risks that contributed to the financial crisis. The Council will continue to review additional companies in the designations process, to address remaining threats to financial stability.”

The Council’s designation of these nonbank financial companies subjects them to supervision by the Board of Governors of the Federal Reserve System (Board of Governors) and to enhanced prudential standards. Consistent with the statutory standard for designations by the Council, the Council determined that material financial distress at these companies – if it were to occur – could pose a threat to U.S. financial stability. This does not constitute a determination that the company is currently experiencing material financial distress. The Council’s authority to make these designations is an important tool to mitigate risks posed by these companies, fill gaps in their overall supervision, and provide enhanced standards under which they must operate. The decisions announced today constitute the initial set of companies to be subject to final designations by the Council. Under a separate authority, in July 2012 the Council designated eight systemically important financial market utilities for enhanced risk-management standards.

http://www.treasury.gov/press-center/press-releases/Pages/jl2004.aspx

[mbperrin]

1. Good. I was afraid that this might be another missed opportunity.

But it looks like they may be serious about this part.