Insurer Thrifts to be Subject to Bank Rules

But this list of regulated companies is considered a “moving target” by federal regulators and is subject to change because a number of these companies are seeking to change their status in order escape oversight by the Fed as a thrift holding company.

Robert Benmosche, AIG president and CEO, brought up the issue last Friday during AIG’s conference call with analysts to discuss its second quarter results.

He said AIG has made a comprehensive study of how it will be impacted by federal regulation, and that its only concern is whether it should divest itself of its Wilton, Conn.-based thrift.

He acknowledged that AIG “is giving thought to whether we should now close the bank we have because we’re concerned about that aspect of it and an insurance company invests very differently than a bank would …”

In the latest proposal, the Fed said it had asked for comment in earlier proposals, and had also met with industry representatives and other regulators.

The Fed said these efforts had yielded concerns about imposing “bank-centric” consolidated capital standards; the need to appropriately address certain instruments and assets unique to savings and loan holding companies; the need for appropriate transition periods and the degree of regulatory burden (particularly for those savings and loan holding companies that are insurance companies that only prepare financial statements according to Statutory Accounting Principles).

Moreover, the proposal said, “a number of commenters suggested that the Board defer its oversight of savings and loan holding companies, in part or in whole, to functional regulators or impose the same capital standards required by insurance regulators.”

But, the Fed said in the proposal, “The Board believes both of these approaches would be inconsistent with the requirements set out in section 171 of the Dodd-Frank Act.”

The proposal also that “ the [Fed] Board believes it is important to apply consolidated risk-based and leverage capital requirements to insurance-based holding companies because the insurance risk-based capital requirements are not imposed on a consolidated basis and are based on different considerations, such as solvency concerns, rather than broad categories of credit risk.”

The Board considered all the comments received and believes that the proposed requirements for savings and loan holding companies appropriately take into consideration their unique characteristics, risks, and activities while ensuring compliance with the requirements” of the Dodd Frank Act.

“Further, a uniform approach for all holding companies would mitigate potential competitive equity issues, limit opportunities for regulatory arbitrage, and facilitate comparable treatment of similar risks.”