US financial supervisors apparently want to release the US insurance giant AIG from the strict supervision of system-relevant financial institutions. The Financial Stability Oversight Council (FSCO) is meeting in the near future and is planning to no longer label the nonbank financial company, which is deeply collapsed in the financial crisis of 2008, as a risk to the financial system, according to Bloomberg.
The report claims, therefore, Fed chief Janet Yellen is likely to be the decisive factor with her vote in the committee. The US Fed, the Treasury and AIG did not comment on the information at first. AIG had played a central role in the financial crisis: The company was a good financial player and had to be saved by the state with a hefty $182 billion bailout. AIG repaid the money, but is still under special observation.
The FSOC is a committee led by Finance Minister Steven Mnuchin, to which Yellen and other financial regulators belong. There are also opponents of the plan in the committee. In order to no longer classify a company as a system risk, it needs a two-third majority.
In the US, banks, insurers and other financial institutions that are classified as being more important to the system are more transparent than other companies, for example, stricter capital requirements apply. With their interdependencies in the financial system, such groups could pull down other companies in the crisis situation and are therefore regarded as “too big to fail” – as too great to let them go bankrupt.
“We don’t know whether the regulators will vote to de-designate AIG, but at the very least it looks like they’ve been making progress,” Ian Katz, an analyst with Capital Alpha Partners, wrote in a Thursday note to clients.
Few days ago, the Wall Street Journal reported that The Federal Stability Oversight Council may decide to remove federal oversight of the American International Group as early as Friday (September 22nd).
American International Group Inc said on Monday it will reorganize into three new business units and will no longer have separate commercial and consumer units, marking the first significant move by new Chief Executive Brian Duperreault.