Regulators closer to supervising nonbank financial companies
By Danielle Douglas and Jia Lynn Yang
The Federal Reserve approved a final rule Wednesday that brings the government closer to placing large nonbank companies that were at the heart of the financial crisis under stricter supervision. The rule leaves a strikingly wide swath of companies on the table as potentially falling under tougher oversight, including private-equity firms and hedge funds. Yet industry officials and others following the process say it’s unlikely that officials will ultimately single out more than a handful of firms. Jaret Seiberg, a managing director at Guggenheim Securities, said in a report Wednesday that the most likely firms to be designated are GE Capital, American International Group, Prudential and MetLife. Any final decision by officials will be closely watched by Wall Street, since a company designated by the government as “systemically important” would face tougher capital standards, among other restrictions, that could eat into the firm’s profitability. “The Fed has taken a very broad view of the types of activities covered in the definition, which gives [regulators] a good deal of discretion,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting firm.
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