GE Capital asks US government to lift ‘too big to fail’ designation – Reuters

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WASHINGTON Lender GE Capital asked the U.S.
government on Thursday to stop designating it as “too big to
fail,” saying it had shrunk to the point where it would not pose
a major threat to the nation’s financial stability if it
experiences distress.

Chief Executive Officer Keith Sherin said in a statement
that the General Electric Co unit no longer met the
criteria for a “systemically important financial institution,” a
label that can trigger requirements for stricter oversight and
more capital.

The application came the day after a federal judge struck
down the designation of insurer MetLife Inc, but GE
Capital said the two events were unrelated. The company had said
in October that it hoped to apply to the Financial Stability
Oversight Council, which includes the Treasury secretary and
Federal Reserve chair, for “de-designation” in the first

The 2010 Dodd-Frank Wall Street reform law authorized
regulators to designate non-bank financial companies as
systemically important, largely in response to the near-collapse
of insurer American International Group Inc and the $182
billion U.S. government bailout it received during the 2008
economic meltdown.

Only four non-banks have been deemed too big to fail, and
the label has prompted most to consider reorganizing to pre-empt
any increased regulation. GE Capital is the first to apply to
have the designation removed.

Shares of General Electric were up 0.4 percent at $31.96 in
afternoon trading. The industrial conglomerate has been working
to reduce GE Capital’s size and said last April that it would
focus on technology and manufacturing.

GE Capital, which received the systemically important label
in 2013, said it had more than halved its assets to $265 billion
from $549 billion at the end of 2012.

The unit said it had ended all consumer lending in the
United States, reduced real estate debt by more than 75 percent,
eliminated its real estate equity and cut outstanding commercial
paper by almost 90 percent.

“Our plan to change our business model, shrink the company
and reduce our risk profile has been successful,” Sherin said.


The Financial Stability Oversight Council “welcomes the
opportunity to evaluate developments at any designated non-bank
financial company and their potential effect on financial
stability,” said Treasury spokesman Rob Friedlander. “There is a
clear process for de-designation.”

Each year the council reviews its previous designations and
decides whether any changes at a company justify a rescission of
the label, he said.

“Before the financial crisis, some of the largest, riskiest
non-bank financial companies were not subject to adequate
oversight,” Friedlander added.

S&P Global Market Intelligence analyst Jim Corridore, who
follows General Electric, said in a note on Thursday that he
expected GE Capital’s designation to be removed.

“GE Capital’s transformation has significantly de-risked the
company,” Corridore said.

MetLife, the largest U.S. life insurer, sued after it was
designated systemically important in 2014. Earlier this year, it
said the “regulatory environment” and potentially large capital
requirements were causing it to consider spinning off its retail

Meanwhile, billionaire investor Carl Icahn has pressured AIG
to split into smaller companies to shed its designation.

AIG CEO Pete Hancock said on Thursday that the MetLife court
decision created an opportunity for the company to seek
de-designation, but it was “reserving judgment.”

Prudential Financial Inc, which was designated
systemically important in 2013, did not immediately respond to a
request for comment.

GE Capital asks US government to lift ‘too big to fail’ designation – Reuters