Federal Reserve Chair Janet Yellen said freeing American International Group Inc. from the tight scrutiny tied to its too-big-to-fail label is an example of the process working properly — proving that a systemically important financial institution can make itself less risky.
"AIG has largely sold off or wound down its capital markets businesses, and has become a smaller firm that poses less of a threat," Yellen said in a statement on her pivotal vote in the Financial Stability Oversight Council's 6-3 decision last week. "The possibility of de-designation provides an incentive for designated firms to significantly reduce their systemic footprint."
Other regulators on the panel led by Treasury Secretary Steven Mnuchin also issued statements Monday that accompanied a document explaining the group's decision. The paper explains how AIG's turn from its crisis-era portfolios and its generally smaller scale helped make the case that it should be let out of the cage built by the 2010 Dodd-Frank Act and Obama-era regulators.
The council voted Friday to remove AIG's label as a so-called SIFI. That leaves only Prudential Financial Inc. as the sole SIFI still under heightened scrutiny, which means it faces tougher rules and oversight administered by the Federal Reserve.
Managers of MetLife Inc. cited concerns about SIFI designation as one reason to spin the company's retail life and annuity operations off into a separate company.
Competitive Environment
"I am concerned that by picking institutions from among similarly situated competitors within the same industry and labeling one systemically important and not the other, we may adversely affect the competitive environment in unfair and arbitrary ways," said Acting Comptroller of the Currency Keith Noreika.
