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Federal Reserve Board Chairman Ben Bernanke on Wednesday avoided giving specifics on how the central bank will oversee a growing list of nonbank financial companies deemed systemically risky.
September 18 -
Prudential Financial was given the opportunity to challenge its designation as a "systemically important financial institution" in a closed-door hearing with the Financial Stability Oversight Council.
July 23 -
The Financial Stability Oversight Council unanimously voted Tuesday to designate American International Group and GE Capital as systemically important financial institutions, the first nonbanks to be named to that category.
July 9 -
Prudential Financial Inc.'s appeal against a designation that the firm is systemically important is unlikely to succeed, observers said, but could force the Federal Reserve Board to detail more about how it will supervise such companies.
July 3
WASHINGTON Prudential Financial Inc. became the third nonbank firm on Thursday to be designated as a risk to the financial system by a group of regulators.
The Newark, N.J.-based company announced the decision in a statement specifying that the Financial Stability Oversight Council, headed by Treasury Secretary Jacob Lew, stuck to its June decision to name the insurance firm as systemically risky.
The company said it will take the next "30 days to consider its response to FSOC's determination. We are currently reviewing the rationale for the determination and our options."
A Treasury spokeswoman declined to comment.
Prudential now joins American International Group and GE Capital in facing a tougher set of supervisory standards and will be required to prepare and file a plan with regulators detailing how to safely unwind the company if it's on the brink of failure. It's unclear exactly what additional capital and liquidity requirements those nonbank firms would face under the Fed's supervision.
On Wednesday, Federal Reserve Board Chairman Ben Bernanke didn't shed any further light on how firms, like Prudential, will be supervised by the Fed. Instead, he reiterated that regulators want to examine each firm on a case by case basis in order to determine the best approach to supervision.
"We want to use the word 'tailoring,' because we want to design a regime that is appropriate for the business model of the particular firm," said Bernanke, in a press conference following a two-day Federal Open Market Committee meeting.
While AIG and GE Capital have already fallen under the Fed's purview because they own banking subsidiaries, insurance companies like Prudential will likely be more complicated to regulate.
The Fed has already postponed offering further clarity by agreeing to delay any decision on how capital rules would affect insurance-related holding companies in a final rule released in June implementing general capital standards under Basel III.
Unlike AIG and GE Capital, Prudential opted to challenge the FSOC's decision, but its appeal which had been widely expected given its public criticism has always been considered a long shot by observers. The 10-member regulatory panel held a hearing with the company near the end of the July. Regulators had up to 60 days to make a final decision.
Affirming Prudential's systemic riskiness comes weeks after the Financial Stability Board, in consultation with the International Association of Insurance Supervisors, named the company, along with AIG and MetLife, among nine globally systemically important insurers.
