AIG, GE Capital And Prudential Have Something In Common

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They are just a weekend away from learning what exactly "systematically important" means in practical terms.

The Financial Stability Oversight Council is considering designating at least three companies as systemically important at its meeting Monday, a move that would ultimately give the Federal Reserve oversight of those firms.

The oversight council, which is led by the Treasury Department and includes top banking and markets regulators, hasn't disclosed which companies it feels pose a risk to the U.S. financial system and merit tougher scrutiny, but at least three—Prudential Financial Inc., American International Group Inc. and the GE Capital unit of General Electric Co.—have publicly disclosed they have advanced to the final stage of the three-step process and are being considered for the designation. Regulators are considering a number of firms that could ultimately be subject to the enhanced oversight….

A vote Monday would start a 30-day clock for firms to challenge the designation and request a hearing. If a company doesn't challenge the move, the council, formed by the Dodd-Frank financial-overhaul law, must act within 40 days of Monday's decision to finalize the designation with another vote….

Companies designated as systemically important could be subject to higher capital levels and regular "stress tests" to ensure they can absorb losses. All banks with more than $50 billion in assets automatically received such designations. Regulators subsequently deemed eight payment and clearing firms, which provide the backbone for the financial system by ensuring liquidity, as systemically important.

Panel Nears Decision on Nonbank Firms [WSJ]

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