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WBK Industry News - Federal Regulatory Developments

Financial Stability Oversight Council Announces Rescission of AIG’s Nonbank Financial Company Designation

The Financial Stability Oversight Council (FSOC) announced that it has rescinded its determination that material financial distress at American International Group, Inc. (AIG) could pose a threat to U.S. financial stability and that AIG shall be subject to supervision by the Board of Governors and enhanced prudential standards.  FSOC’s announcement occurred on September 29, 2017.

Pursuant to section 113 of the Dodd-Frank Act, on July 8, 2013, FSOC made a final determination that material financial distress at AIG could pose a threat to U.S. financial stability and that AIG shall be subject to supervision by the Board of Governors and enhanced prudential standards.  As such, AIG was designated as a “systemically important financial institution” (also referred to as “too big to fail”).  Section 113(d) of the Dodd-Frank Act requires FSOC to reevaluate its nonbank financial company determinations at least annually.  In conducting its analysis of AIG, FSOC relied on information and materials including written materials submitted by AIG, and consultations with the New York Department of Financial Services, the Texas Department of Insurance, the Pennsylvania Insurance Department, the Federal Reserve Bank of New York, the Board of Governors, and the Federal Deposit Insurance Corporation.

“The Council has worked diligently to thoroughly reevaluate whether AIG poses a risk to financial stability,” said Treasury Secretary Steven T. Mnuchin.  “This action demonstrates our commitment to act decisively to remove any designation if a company does not pose a threat to financial stability.” Due to FSOC’s decision to remove AIG’s “systemically important financial institutions” designation, AIG is no longer subject to the heightened regulatory and capital requirements applicable to such institutions.

The FSOC’s press release can be found here.