Prudential Financial Inc. plans to challenge its designation as a systemically important financial institution.
It declined to join American International Group and GE Capital as the first nonbank financial firms to be overseen by the Federal Reserve Board as systemically significant. Instead, it asked the FSOC to schedule a nonpublic evidentiary hearing on its appeal. Under the regulations, the FSOC has 60 days after the hearing to determine if it still wishes to designate Pru as a SIFI. If Prudential wants, it can then appeal to the courts. Pru announced its decision in a SEC filing Tuesday after the market closed.
Prudential declined further comment.
A Treasury spokesperson said that the Financial Stability Oversight Council “has developed a robust process for evaluating whether a nonbank financial company should be subject to [Fed] and to enhanced prudential standards. While the Council does not comment on proposed designations, the Council anticipates that it will grant a hearing within 30 days for any company that contests it.”
Prudential’s decision was different than AIG and GE. AIG issued a statement Tuesday afternoon confirming that it has accepted designation as a systemically important insurer, and is “already working closely” with the Federal Reserve Bank of New York “as our regulator.”
The AIG statement was made by Jon Diat, an AIG spokesman in New York.
The decision is historic, because no insurer has been federally regulated for more than 150 years, according to recent testimony by an official of the Congressional Research Service.
The two insurers and GE Capital were informed of the decision June 3 by the Financial Stability Oversight Council. Under the rules governing such a designation, they were given 30 days to disclose whether they would accept such a decision or challenge it in court.
GE said shortly after 3 p.m. that it won’t appeal the designation of its GE Capital unit as a SIFI.
A spokesman for GE Capital said the company has “been prepared for this expected designation … Accordingly, we have decided not to appeal or ask for a hearing. GE Capital is safe and secure. We have been and will be prepared to meet the requirements for SIFIs.”
According to the rules governing such a designation, the FSOC is required to vote again on the matter to finalize the designation for the company within 40 days of the initial determination.