Prudential to Accept Non-Bank SIFI Designation
October 21, 2013 by Jeff Jeffrey
WASHINGTON – Prudential Financial Inc. will not challenge the Financial Stability Oversight Council’s designation of the company as a non-bank systemically important financial institution.
Prudential, headed by Chief Executive Officer John Strangfeld, had until Oct. 19 to alert the FSOC if the company decided to continue fighting the non-bank SIFI designation. In June, Prudential was one of three financial institutions to receive non-bank SIFI designations. Prudential lodged an appeal but the company’s SIFI designation was upheld in September. In September, FSOC members decided that Prudential could pose a threat to U.S. financial stability and the company should be subject to supervision by the board of governors of the Federal Reserve System and enhanced prudential standards (Best’s News Service, Sept. 20, 2013).
In a statement, Prudential said it would continue to work with the Fed and others to “develop regulatory standards that take into account the differences between insurance companies and banks, particularly in the use of capital, and that benefit consumers and preserve competition within the insurance industry.”
Prudential has more than $1 trillion in assets under management as of June 30 and has operations in the United States, Asia, Europe and Latin America.
The other two companies, American International Group Inc. and GE Capital, which does not have an insurance arm, both decided not to challenge the SIFI designation (Best’s News Service, June 4, 2013).
MetLife Inc., the largest life insurance company in the United States, confirmed it has reached stage three in the FSOC’s process to determine whether it would be named a non-bank SIFI (Best’s News Service, July 17, 2013).
Prudential was also one of nine companies to be included on the G-20’s Financial Stability Board’s initial list of global systemically important insurers.
The companies included on the list will face additional regulatory oversight and more stringent capital requirements. But those requirements won’t be spelled out by the International Association of Insurance Supervisors until the G-20’s Summit next year. Implementation details for higher capital requirements will be developed by the end of 2015. The requirements will apply starting in January 2019 to G-SIIs identified as of November 2017, the FSB said in a July 18 announcement (Best’s News Service, July 31, 2013).
Most Prudential subsidiaries currently have a Best’s Financial Strength Rating of A+ (Superior). On the afternoon of Oct. 18, shares of Prudential Financial Inc. (NYSE: PRU) were trading at $82.53, up 0.33% from the previous day’s closing price.
(By Jeff Jeffrey, Washington Bureau manager: jeff.jeffrey@ambest.com)
