Council Names Two Companies for
Consolidated Supervision and
Enhanced Prudential Standards
WASHINGTON – 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.
nonbank financial companies subject to final designations by the Council are:
International Group, Inc. (AIG)
Electric Capital Corporation, Inc. (GECC)
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.”
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.
basis for each company’s designation is available at www.fsoc.gov.
Dodd-Frank Act sets forth the standard for the Council’s designation of a
nonbank financial company and requires the Council to take into account 10 specific
considerations when evaluating those companies.
To further inform the public of the Council’s framework and processes
for assessing nonbank financial companies, the Council issued a rule and
interpretive guidance, beginning with the release of an advance notice of
proposed rulemaking at its very first meeting in October 2010. The vote announced today follows the comprehensive
process laid out in the Council’s rule and guidance.
The Council generally assesses nonbank financial companies in
a thorough, three-stage process. In Stage
1, the Council applies uniform quantitative thresholds to identify nonbank
financial companies for further evaluation.
In Stage 2, the Council analyzes the nonbank financial companies
identified in Stage 1 using a broad range of information available to the
Council primarily through existing public and regulatory sources. In Stage 3, the Council contacts each nonbank
financial company that the Council believes merits further review to collect
information directly from the company that was not otherwise available in the
prior stages. Each nonbank financial
company that is reviewed in Stage 3 is notified that it is under consideration
and is provided an opportunity to submit written materials related to the
Council’s consideration of the company for a proposed designation.
Each of these nonbank financial companies subject to a
Council designation received a letter on June 3, 2013, informing it that the Council
had made a proposed designation and providing it with an explanation of the
basis of the Council’s proposed designation.
Each company had 30 days to request a hearing to contest the Council’s proposed
designation, but neither AIG nor GECC requested such a hearing. The
Council also voted on July 8 to grant the request by a nonbank financial company
for a written and oral hearing to contest the Council’s June 3 proposed designation. The Council will hold any hearing within 30
days after receiving the request from the company.
Further information on the process for the Council’s nonbank
financial company designations and the Council’s resolutions and basis for its designations
is available at www.fsoc.gov.