Council whittles down again ‘systemically important’ non-bank financial companies with Prudential de-designation

Noting changes that have been made at the firm since 2013, a group of federal regulators announced Wednesday that it has rescinded the “systemically important” designation from Prudential Financial Inc., one of the nation’s largest insurance and financial services providers, removing the firm from oversight by the Federal Reserve.

The decision to remove the designation was unanimous, according to a release from the regulators.

Of the four big financial companies that have been given the designation since 2013, three have now been “de-designated” by the Financial Stability Oversight Council (FSOC), a group representing federal financial institution and market regulators. Treasury Secretary Steven Mnuchin chairs the group.

Prudential had been given the designation five years ago after the FSOC determined that material financial distress at Prudential could pose a threat to U.S. financial stability.

However, in a statement released Wednesday, the council noted that things have changed over the last five years.

“Based on the Council’s analysis of Prudential and on changes since September 2013 that could be material to the Council’s conclusions, and in light of the statutory considerations, the Council has rescinded its final determination that material financial distress at Prudential could pose a threat to U.S. financial stability and that Prudential shall be supervised by the Board of Governors and be subject to enhanced prudential standards,” the FSOC said in the conclusion of a 66-page document explaining its decision.

The FSOC met Tuesday to consider the rescinding the designation of the firm, first made in 2013.

“The Council’s decision today follows extensive engagement with the company and a detailed analysis showing that there is not a significant risk that the company could pose a threat to financial stability,” Mnuchin said in a statement. “The Council has continued to act decisively to remove any designation that is not warranted.”

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), the FSOC is authorized to determine that a nonbank financial company’s material financial distress could pose a threat to U.S. financial stability. Such companies are subject to consolidated supervision by the Federal Reserve and enhanced prudential standards.

Between 2013 and 2014, the FSOC voted to designate Prudential and three other large, non-bank financial companies – American International Group Inc. and General Electric Capital Corporation Inc. (both July 8, 2013), and Met Life (Dec. 18, 2014) – as “systemically important.”

To date, three have been “de-designated” by the FSOC (AIG on Sept. 29, 2017, GE Capital on June 28, 2016, and Prudential Tuesday). Only MetLife continues to hold the designation.

Voting members of the FSOC are the chairs or top regulators from: the Federal Reserve System; Office of the Comptroller of the Currency; Bureau of Consumer Financial Protection; Securities and Exchange Commission; Federal Deposit Insurance Corporation; Commodity Futures Trading Commission; Federal Housing Finance Agency; National Credit Union Administration; and an independent member having insurance expertise who is appointed by the president and confirmed by the Senate for a six-year term.

The Secretary of the Treasury is also a voting member of the council.

Financial Stability Oversight Council Announces Rescission of Nonbank Financial Company Designation

Notice and Explanation of the Basis for the Financial Stability Oversight Council’s Rescission of Its Determination Regarding Prudential Financial, Inc.

Member Views on the Basis for the Financial Stability Oversight Council’s Rescission of the Determination Regarding Prudential Financial, Inc. (Mel Watt, FHFA)