The Fed also laid out how it would oversee General Electric Capital Corp (GEB.N), the financial arm of GE (GE.N), one of four non-bank firms the Fed is overseeing after the crisis because of their significance to the overall system. Citigroup was up about 0.5%, as were Bank of America and Wells Fargo.
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Most of the banks have already put away the additional capital. It now falls about $12.5 billion short, according to Fed officials.
The Fed first proposed rules outlining the surcharge at the end of 2014. A key risk factor will be how much a bank relies on short-term funding markets to borrow from other banks. All told, the banks will need to hold roughly $200 billion in additional capital to comply with the new requirement. “If GECC is de-designated during the next two and a half years, the full set of enhanced prudential standards will never take effect”.
GE Capital’s attempt to evade the label of “systemically important” is of significant interest to the financial industry and members of Congress who have anxious that the designation is a regulatory “Hotel California”, burdening companies with added regulations but providing them with no way out.
That label of a “systemically important” nonbank financial company meant that GE Capital had to increase its capital cushion, limit its use of borrowed money and submit to inspections by examiners.
But the rules would only kick in over a number of years, giving the company time to shrink its business and bring it below the supervisory thresholds. The Fairfield, Connecticut-based company reached deals in June to unload its vehicle fleet-management and European buyout-lending divisions. It had struggled during the crisis due to mounting defaults and losses on loans in areas like credit cards, commercial real estate and heavy equipment.
The Federal Reserve announced rules Monday on banks deemed to be Global Systemically Important Financial Banks, or G-SIBs.
The systemic-risk council is a group of regulators led by Treasury Secretary Jacob J. If that happens, the Fed’s action will be cancelled.
“We think it’s important and are gratified that the Federal Reserve has taken GE Capital’s submissions, circumstances and exit plan into account in finalizing the order”, GE spokesman Seth Martin said in a statement. The numbers were in line with an estimate by Goldman Sachs (GS.N) analysts in December.
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The eight firms now subject to the surcharge are Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street, and Wells Fargo.
