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The Financial Stability Oversight Council will re-evaluate Prudential Financial Inc.’s “too big to fail” tag in the near future, according to the U.S. Treasury Secretary.
The council has held the responsibility of evaluating companies and had designated four nonbank institutions as systemically important financial institutions since the financial crisis. Institutions designated as SIFIs are subject to stricter oversight and stricter capital requirements.
The FSOC designated Newark, New Jersey-based Prudential as a SIFI in September 2013, but some observers expect the council to lift the designation after it removed the designation for American International Group Inc. in September and jointly moved for dismissal of the litigation involving New York-based Metlife Inc.’s designation in January.
Treasury Secretary Steven Mnuchin expects Prudential’s re-evaluation to occur in the near future, he said during a House Financial Services Committee hearing on Tuesday.
He declined to comment further on the Prudential re-evaluation process but noted that a majority of FSOC members recommended that the U.S. Department of Justice drop the Metlife litigation.
“We will be working with the committee on revised guidelines for designations,” he said.
Mr. Mnuchin also urged the U.S. House of Representatives and the Senate to pass the Financial Choice Act “as quickly as possible.” The legislation would eliminate the council’s ability to tag insurers as SIFIs and refocus a federal regulatory agency on international insurance talks, according to experts.
“Too big to fail” designations for insurers may become a thing of the past amid a Republican-led effort to eliminate or revise certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, but the impact will be limited as only two insurers are currently tagged with the designation.