Regulators propose new oversight of AIG, Prudential

Mon Jun 3, 2013 7:55pm EDT
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By Emily Stephenson

WASHINGTON (Reuters) - Regulators on Monday proposed designating non-bank financial companies including American International Group and Prudential Financial for heightened regulatory oversight.

A group of regulators known as the Financial Stability Oversight Council said it had voted to propose dubbing certain companies "systemically important," or so big their failure could destabilize financial markets, in a long-anticipated and controversial move aimed at cracking down on risks.

Regulators did not name the companies involved. AIG and Prudential both issued statements on Monday saying they had been notified that the risk council had proposed designating them.

A final determination by the council that a firm is systemically important would trigger extra regulatory scrutiny by the Federal Reserve.

GE Capital, the finance arm of General Electric, has previously said it was under consideration. A spokesman for the company did not immediately respond to a request for comment.

"Today, the council took another important step forward by exercising one of its principal authorities to protect taxpayers, reduce risk in the financial system, and promote financial stability," Treasury Secretary Jack Lew, who chairs the oversight council, said in a statement.

The 2010 Dodd-Frank law created the risk council and gave it the power to bring big, non-bank firms under the Fed's oversight after several such companies flirted with failure or had to be bailed out during the 2007-2009 financial crisis.

Companies tagged for extra oversight would have to participate in regular stress tests, comply with new capital requirements and write living wills, or blueprints for how they could be taken apart if they were to fail.   Continued...

U.S. Treasury Secretary, Jack Lew, arrives at the G7 Finance Ministers meeting in Aylesbury, southern England May 10, 2013. REUTERS/Alastair Grant/Pool