Alert July 16, 2013

FSOC Designates Two Nonbank Financial Companies as Systemically Important in FSOC’s First Use of This Authority Under Dodd-Frank

On July 9, 2013 the Financial Stability Oversight Council (the “FSOC”) used, for the first time, its authority under Title I of the Dodd-Frank Act to designate one or more nonbank financial companies, that the FSOC determines pose a potential threat to U.S. financial stability, as subject to consolidated supervision and enhanced prudential standards.  The two nonbank financial companies designated by the FSOC on July 9, 2013 are American International Group, Inc. and General Electric Capital Corporation, Inc. (the “Designated NFCs”).

As a result of the FSOC’s designation, the Designated NFCs will be subject to oversight by the FRB.  In arriving at their final decision to designate the Designated NFCs, the FSOC concluded that the two Designated NFCs were “systemically important” and that material financial stress at either of the Designated NFCs could pose a threat to U.S. financial stability.  In prior actions under separate authority, the FSOC has designated certain large banking organizations and financial-market utility firms as “systemically important.”

Treasury Secretary Jacob L. Lew, Chairperson of the FSOC, stated that the FSOC “will continue to review additional companies in the designation process, to address remaining threats to financial stability.”