GE Capital became the first financial institution to shed its designation as systematically important to the financial system. The U.S. Financial Stability Oversight Council (FSOC) removed the GE finance unit’s designation as a Systemically Important Financial Institution (SIFI) yesterday. The decision means the Federal Reserve will no longer regulate GE Capital as a nonbank SIFI.
The FSOC was created in 2010 as part of the Dodd-Frank financial reform act. It designated GE Capital as a nonbank SIFI in 2013. In addition to being under Federal Reserve oversight, nonbank SIFIs are subject to capital adequacy and other regulatory requirements in order to ensure their safety and soundness.
The FSOC agreed to remove the SIFI designation after GE Capital had executed “significant divestitures, transformed its funding model, and implemented a corporate reorganization.”
GE Capital applied to the FSOC for removal of the designation in March, after the company spent a year transforming itself into a smaller financial services provider by shedding over half of its assets.
Less than 90 days later, the FSOC member agencies took the vote. The agency released a public order stating that in a unanimous vote, it determined GE Capital “no longer meets the standards” of being a SIFI and has “rescinded its final determination that material financial stress at GE Capital could pose a threat to U.S. financial stability.”
GE Capital said that the “landmark decision” has been “the biggest milestone yet” in its transformation, which started in April 2015. In the 14 months since GE announced that it would become a “more focused digital industrial company” by selling most of GE Capital assets, the company has completed nearly 90 percent of the plan and announced $180 billion in signed transactions. GE Capital says it remains a year ahead of the transformation schedule and expects to be largely complete with the process by the end of 2016. “We have transformed GE by exiting most of financial services, acquiring Alstom, and investing to be a leader in the Industrial Internet,” said GE Chairman and CEO Jeff Immelt.
Moving forward, GE Capital will continue to be part of the GE Store and support the growth of GE’s industrial businesses.
Additionally, today GE Capital reaffirmed its plan to return $18 billion in dividends to its parent, GE, this year, and a total of $35 billion in dividends during the entire transformation.
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