On June 29, 2016, the Financial Stability Oversight Council (FSOC) announced that it had voted to lift its designation of GE Capital as a systemically important financial institution (SIFI). The Dodd Frank financial reform act established the FSOC, which is chaired by the US Treasury Secretary and includes the major US financial regulators, after the 2008 financial crisis. One of its primary functions is to designate a nonbank financial company as a SIFI if it determined that (i) the company could pose a threat to the financial stability of the United States if it encountered material finance distress or (ii) the company’s nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of nonbank financial company could pose a threat to the financial stability of the United States. SIFIs are subject to the prudential supervision of the Federal Reserve Board.
GE Capital was one of the first nonbank financial companies to be designated as a SIFI in July 2013. The rescission of the SIFI designation on GE Capital leaves two remaining SIFIs, AIG and Prudential Financial. The FSOC also designated MetLife as a SIFI but that decision is currently being litigated.
GE Capital announced in 2015 its intention to change its business plan and focus through a series of divestitures, a change in its funding model and a corporate reorganization. For example, GE Capital no longer owns any US banks and does not make loans to US consumers or small businesses. GE Capital kept FSOC members aware of its actions in executing this plan, and earlier this year, it made a written submission to the FSOC, arguing that its current business plan and activities no longer merited the SIFI designation for GE Capital.
After a review of that submission, discussions with GE Capital and consultation with other regulators of GE Capital, the FSOC voted to lift the SIFI determination and issued a lengthy public explanation of its reasons for doing so, to, as noted in the FSOC press release, “provide the public with an understanding of [FSOC’s] analysis” in reaching its decision to lift the SIFI determination.