WASHINGTON, July 9 (Xinhua) -- U.S. financial regulators on Tuesday named American International Group (AIG) and General Electric Capital Corporation (GECC) as sources of financial instability, designating the two financial companies to manage potential risks to the financial stability.
The Financial Stability Oversight Council (FSOC), an intra- government policy-setting group created by the Dodd-Frank overhaul, announced that it had voted to designate these two financial companies to address potential threats to financial stability, U.S. Treasury Department said in a statement.
This is the FSOC's first use of its authority under Title I of the 2010 Dodd-Frank Act to subject a nonbank financial company to consolidated supervision and enhanced prudential standards, noted the statement. The two companies have to increase their cushion against losses and submit to inspections by regulators.
"Today, the Council has taken a decisive step to address threats to U.S. financial stability and create a safer and more resilient financial system," said Treasury Secretary Jacob Lew, Chairperson of the FSOC.
"These designations will help protect the financial system and broader economy from the types of risks that contributed to the financial crisis. The Council will continue to review additional companies in the designations process, to address remaining threats to financial stability," Lew said.
Title I of the Dodd-Frank Act establishes the FSOC, and also expands financial regulators' authority to allow for supervision of certain nonbank financial companies and large bank holding companies that could have a substantial impact on the U.S. economy. Prior to the Dodd-Frank Act, some nonbank financial companies and bank holding companies were left outside of government supervision, despite their potential threats to impact the financial stability.
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