The Federal Reserve has for the first time solicited comment on how it will regulate GE Capital, one of the three non-banks designated so far by the FSOC as systemically-important financial institutions (SIFIs). The approach adopted by the Board will have significant impact not only for GE and other designated SIFIs, but also for non-banks that are depository-institution or savings-and-loan holding companies under the FRB if it imposes the proposed largely BHC-like framework along with still more stringent restrictions designed to isolate bank-like operations from the rest of the SIFI. However, aspects of the proposed approach for GE capital Corporation (GECC) are firm-specific and could be varied in significant ways for other SIFIs or non-bank firms subject to the FRB. In general, GE Capital will come under the rules governing the largest U.S. bank holding companies, including very stringent leverage-capital requirements, restrictions on upstreaming dividends, and liquidity rules. The FRB says throughout this proposal that it may tailor at least some of the requirements or permit GECC to depart from them based on the unique characteristics of a non-bank SIFI. Transition periods are also provided to permit GECC to build a BHC-like regulatory infrastructure, although the relatively short deadlines still proposed could present the firm with considerable operational and compliance challenges atop the strategic ones resulting from the stringent proposal.
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