Regulators pull back 'systemically important' label for the first time

Regulators pull back 'systemically important' label for the first time
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The federal government for the first time has agreed to soften its oversight of an institution it once thought critical to the financial system.

Financial regulators announced Wednesday that it was no longer treated GE Capital as a “systemically important financial institution,” or SIFI.

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The move marks the first time the government has agreed to step back on the use of the heightened oversight granted it by the Dodd-Frank financial reform law. It also comes as the government is embroiled in a court battle with another SIFI, MetLife, which has successfully sued the government over receiving that label. The government is appealing that case.

Under Dodd-Frank, regulators are charged with identifying financial institutions that play a core role in the overall financial system and imposing stricter rules and oversight on the ones whose failure could disrupt that system.

The Financial Stability Oversight Council, which gathers top regulators across the government, has attached SIFI labels to several of the biggest names in finance since its creation. But regulators said Wednesday that GE Capital had significantly overhauled its business since obtaining the SIFI label in 2013 and now is much less of a central figure in financial markets.

“Today’s decision clearly demonstrates that the Council’s designation of nonbank financial companies is a two-way process,” said Treasury Secretary Jack LewJacob (Jack) Joseph LewObama talks up Warren behind closed doors to wealthy donors On The Money: Lawmakers pile on the spending in .4T deal | Trump-Pelosi trade deal creates strife among progressives | Trump, Boris Johnson discuss 'ambitious' free-trade agreement Former Obama Treasury secretary endorses Biden MORE. “The Council follows the facts: When it identifies a company that could threaten financial stability, it acts; when those risks change, the Council also acts.”

Wednesday’s action eases oversight on GE Capital and also serves as a rebuttal to critics of the oversight council and Dodd-Frank, who had previously contended that it was impossible for an institution to shake the SIFI label once it was applied. Congressional Republicans have argued that the label actually is a boon to companies that have it, as it effectively serves as a label for what institutions are “too big to fail” and thus would be rescued by the government if facing failure.

But GE Capital aggressively reorganized its business in an effort to get out from under that label. The company petitioned the government in March to remove the SIFI designation and argued it had significantly shrunk and simplified its operations.