On September 29, 2017, the Financial Stability Oversight Council (FSOC) formally lifted its designation of American International Group, Inc. (AIG) as a systemically important financial institution (SIFI). The FSOC was established pursuant to the 2010 Dodd-Frank financial reform legislation and is chaired by the Secretary of the Treasury with members composed of the federal financial services regulators, state regulators in banking, insurance and securities and an independent member with insurance expertise. Its various responsibilities include designating as SIFIs those large nonbank financial institutions the material financial distress of which would be a threat to the stability of the US financial system. SIFIs are subject to regulation and supervision by the Federal Reserve Board and the designations are to be reevaluated by the FSOC at least annually.
The FSOC’s decision to lift the designation was not unanimous. Voting in favor were the Secretary of the Treasury, Acting Comptroller of the Currency, Chair of the Commodity Futures Trading Commission (CFTC), chair of the National Credit Union Administration (all Trump designees), along with the Chair of the Federal Reserve Board and the FSOC’s independent member with insurance expertise. Voting against lifting the designation were the Chair of the Federal Deposit Insurance Corporation (FDIC), the Director of the Consumer Financial Protection Bureau and the Director of the Federal Housing Finance Agency. The remaining FSOC member, the Chair of the SEC, was recused and did not vote.
Since 2010, only four SIFI designations have been made. General Electric Capital Corporation had its SIFI designation lifted in 2016 after reorganizing and selling many of its financial services operations. MetLife challenged its SIFI designation and won in US federal district court to overturn the FSOC decision; the case currently is on an appeal which was filed prior to the election of Donald J. Trump as president and which currently is stayed pending issuance of a report by the Secretary of the Treasury ordered by the President on the FSOC designation and determination process.
With AIG’s SIFI status lifted, the last SIFI standing is Prudential. One can assume that its SIFI designation also may be in the process of review by the FSOC.