General Electric (GE) said Thursday that the U.S. government should drop the too-big-to-fail designation assigned to its GE Capital business following the unit's significant reduction in size.
GE Capital filed a request to the U.S. Financial Stability Oversight Council for removal of the non-bank Systemically Important Financial Institution (SIFI) designation.
The request comes a day after a federal judge ruled that insurance company MetLife's SIFI designation should be dropped, a ruling that could embolden GE Capital in its quest to shed its own too-big-to-fail status.
Companies assigned too-big-to-fail status by the Financial Stability Oversight Council are subject to greater scrutiny by the Federal Reserve. The Dodd-Frank Act of 2010 established the panel to monitor U.S. institutions to prevent the type of domino-effect financial collapse that occurred during the Great Recession, when crises at non-banks, such as AIG, undermined the economy.
GE Capital announced in April 2015 that it would sell about $200 billion of its assets. It has already reached agreements to sell $161 billion, of which $138 billion in deals have been closed. The moves include an exit from consumer lending and leveraged lending, as well as substantial reductions in real estate debt and equity holdings and commercial paper.
The company now holds about $265 billion in assets, down from $549 billion.
“Our submission details the complete transformation of GE Capital. Our plan to change our business model, shrink the Company and reduce our risk profile has been successful,” GE Capital CEO Keith Sherin said in a statement.
Asked to address the GE Capital request, the U.S. Treasury Department's public affairs division issued a statement that did not directly address the company. It said the Financial Stability Oversight Council "welcomes the opportunity to evaluate developments at any designated nonbank financial company and their potential effect on financial stability."
"As Secretary (Jack) Lew has stated, there is a clear process for de-designation," Treasury said in a statement. "Each year the Council carefully reexamines each of its previous designations, invites each company to meet in person with Council staff, and evaluates whether any changes at the company, or in its regulation or markets, justify a rescission of the designation."
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