Washington, D.C. — The Financial Stability Oversight Council (FSOC) rescinded Prudential Financial Inc.’s designation as a systemically important nonbank financial company in a vote yesterday. Gregg Gelzinis, research associate for Economic Policy at the Center for American Progress, released the following statement:
The FSOC was created by the Dodd-Frank Act to identify and mitigate threats to financial stability—but under the leadership of Treasury Secretary Steven Mnuchin, the FSOC has rejected that mission. In 2013, insurance giant Prudential Financial was designated as a systemically important nonbank financial company and subjected to enhanced oversight by the Federal Reserve Board. Since that time, Prudential has grown even larger—increasing its assets by more than $100 billion and its derivatives exposures by more than 30 percent. Releasing an $800 billion insurance company from sensible financial stability measures—including stronger capital and liquidity requirements, stress testing, and living wills—decreases the resiliency of the U.S. financial system.
Ten years ago, the failure or near-failure of nonbank financial companies such as Lehman Brothers and American International Group played a significant role in the financial crisis. Under Secretary Mnuchin’s watch, the number of nonbank financial companies facing enhanced scrutiny has dwindled to zero. If another such company triggers or aggravates the next financial crisis, decisions such as this will be to blame.
- Deregulating AIG Was a Mistake by Gregg Gelzinis
- Mnuchin’s ill-advised plan on nonbank SIFIs by Gregg Gelzinis (American Banker)
- Don’t put SIFI designations on the back burner by Gregg Gelzinis (American Banker)
For more information on this topic or to speak with an expert, contact Allison Preiss at gro.ssergorpnacirema@ssierpa or 202.478.6331.