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GE Capital Said to Near Systemic-Risk Label in Review

The decision moves regulators closer to deciding whether GE Capital Corp., which has been regulated by the Federal Reserve since July 2011, should be subject to heightened financial supervision. Photographer: Andrew Harrer/Bloomberg
The decision moves regulators closer to deciding whether GE Capital Corp., which has been regulated by the Federal Reserve since July 2011, should be subject to heightened financial supervision. Photographer: Andrew Harrer/Bloomberg

Oct. 5 (Bloomberg) -- General Electric Co.’s finance arm is in the final stage of a regulatory review to determine if it needs extra scrutiny because of the risk that its potential failure would pose to the U.S. economy, two people with direct knowledge of the matter said.

GE Capital Corp. joins American International Group Inc. as the only two non-banks that the Financial Stability Oversight Council has voted to advance to a third round of evaluations for possible designation as systemically important financial institutions, said the people, who asked not to be identified because the information isn’t public.

The decision moves regulators closer to deciding whether GE Capital, which has been regulated by the Federal Reserve since July 2011, should be subject to heightened financial supervision. While GE has said it expects the unit to be designated systemically important, the Fairfield, Connecticut-based company isn’t discussing the status of its review.

“We will disclose our designation once the final decision has been made,” Russell Wilkerson, a spokesman for GE Capital, said today in an e-mail. “We are prepared for whatever decision is reached.”

The Financial Stability Oversight Council’s review may still advance other companies to its final stage of review, the people said.

Systemically Important

MetLife Inc. and Prudential Financial Inc., the largest U.S. life insurers, are also likely to be deemed systemically important, analysts led by Jay Gelb at Barclays Plc said in an Oct. 2 research note.

Prudential advanced 1.7 percent to $56.70 in New York trading at 4 p.m. MetLife climbed 0.4 percent and GE was up 0.7 percent.

Bob DeFillippo, a spokesman for Newark, New Jersey-based Prudential, declined to comment on its status in the review. MetLife’s Chris Breslin said the New York-based insurer remains under Federal Reserve oversight because it is still a bank-holding company, a status the company is trying to lose by selling deposits.

A Treasury Department spokeswoman declined to comment today and referred to a statement that was released after the last council meeting, on Sept. 28. The panel voted then to extend its evaluation of an unspecified number of non-bank financial firms.

“The council will notify the companies that were advanced but does not intend to publicly announce the name of any non-bank financial company that is under evaluation before a final designation of such company,” the council said.

On Oct. 2, New York-based AIG disclosed that it was among the non-bank financial companies that was still under review.

The FSOC was created as part of the Dodd-Frank law to monitor the stability of the financial system following the crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. Treasury Secretary Timothy F. Geithner chairs the panel, which includes Federal Reserve Chairman Ben S. Bernanke.

To contact the reporters on this story: Meera Louis in Washington at mlouis1@bloomberg.net; Ian Katz in Washington at ikatz2@bloomberg.net; Tim Catts in New York at tcatts1@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Chris Wellisz at cwellisz@bloomberg.net; Dan Kraut at dkraut2@bloomberg.net

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