The Financial Stability Oversight Council voted Tuesday to place GE Capital and American International Group under stricter supervision, the first substantial move to address the risks that large nonbank companies pose to the financial system.
The interagency panel of regulators has ushered in a new era of oversight for a broad swath of firms that play in the financial markets but have largely escaped federal supervision. Now life insurers, hedge funds and private equity firms could come under the purview of the Federal Reserve and face tougher rules to govern their businesses.
“These designations will help protect the financial system and broader economy from the types of risks that contributed to the financial crisis,” Treasury Secretary Jack Lew, who chairs the council, said in a statement.
Tuesday’s vote puts to rest a lengthy, multi-stage review process for GE Capital and AIG. The companies were notified in June of the council’s intentions and given a 30-day window to object to the designation. Unlike Prudential Financial, which was also named by the council, GE Capital and AIG decided not to fight the designation.