By Benjamin Goad - 07/02/13 09:45 PM EDT
Prudential Financial Inc. said Tuesday it would challenge its proposed designation as a “systemically important” institution whose failure could threaten the economy.
The announcement comes a nearly a month after the Financial Stability Oversight Council (FSOC) voted to move forward with plans to designate “an initial set” of undisclosed firms as systemically important financial institutions (SIFI).
Prudential’s challenge begins a 30-day period within which FSOC must grant a hearing on the matter.
“In the meantime, we will continue to work closely with regulators to demonstrate our belief that the company does not meet the requirements of the SIFI designation under the relevant statute,” Prudential said in a written statement.
The FSOC, created by the Dodd-Frank Wall Street reform law, is a 10-member council chaired by Treasury Secretary Jacob Lew and made up of a group of top financial regulators across several agencies.
Dodd-Frank gave the FSOC the authority to designate SIFIs as part of the effort to prevent a repeat of the 2008 economic crisis. But critics say that the label is tantamount to declaring the firms “too big too fail,” which could position them for preferential treatment, or even a government bailout.
The council has not named the firms it has proposed to designate as SIFIs, or say how many there have been, but Prudential, American International Group and GE Capital have each said they were among the first group named.
The council is required to hold a written hearing but has signaled that it would lean toward allowing oral hearings, if requested.
Other firms facing a proposed designation have until Wednesday to announce they are contesting the label. If they do not, the FSOC would vote within the next 10 days to finalize their status.
They would then have additional time to register with the Federal Reserve and come into compliance with various regulations.