Prudential says will not appeal US council's systemic tag

Reuters

By Sarah N. Lynch

WASHINGTON, Oct 18 (Reuters) - Prudential Financial said it will not ask a federal court to overturn a designationby the U.S. risk council that will subject the company to strictcapital requirements and oversight by the Federal Reserve.

The U.S. risk council designated Prudential Financial as"systemically important," a tag that means the insurance firm isso big and interconnected that its hypothetical collapse couldhave a broad and negative effect across the entire market.

"The company will continue to work with the Board ofGovernors of the Federal Reserve System and other regulators todevelop regulatory standards that take into account thedifferences between insurance companies and banks, particularlyin the use of capital," the company said late Friday.

Prudential disclosed earlier this summer that the FinancialStability Oversight Council, a new body of regulators created bythe 2010 Dodd-Frank law, had decided to label the company as a"systemically important financial institution" or SIFI.

Prudential is one of only three non-bank financial firms sofar to be hit with the costly SIFI tag.

The other two companies, AIG International and GECapital, a unit of General Electric, did not appeal.

Certain large banks, including Goldman Sachs Group Inc and Citigroup Inc automatically received the SIFIdesignation.

At the time, Prudential vowed to fight the decision througha closed-door hearing process before the FSOC. Prudential arguedthat it is not too big to fail and that it would be wrong tosubmit an insurer to regulation designed for banks.

The FSOC is chaired by Treasury Secretary Jack Lew andcomprised of the country's top financial market and bankingregulators. They are tasked with policing the marketplace forpotential emerging risks and have the power to classify largefirms that could topple markets as "SIFIs."

Any firm that is dubbed a SIFI will face higher capitalcharges and other additional regulations.

After the FSOC met behind closed doors early this year toconsider Prudential's appeal of its designation, the companyrevealed in September that a majority of FSOC members had stillvoted in favor of designation.

Many outside experts expected the company might considerappealing the decision in federal court.

Had the company decided to keep on fighting, it would havebeen wading into uncharted legal territory.

Rates

View Comments (0)