September 30, 2017
AIG has positively embraced the decision from the Financial Stability Oversight Council to remove the firm from the list of financial organisations deemed as a Systemically Important Financial Institution (SIFI).
The US insurance giant was designated a SIFI or “too big to fail” in 2013 after its near-collapse during the 2008 financial crisis. It was rescued by the US government in September 2008, ultimately requiring $182bn to avoid collapse after losses on risky derivatives. The money was subsequently paid back to taxpayers in four years.
Since then, AIG has stripped down by selling assets and taking measures that the company could argue has made it far less systemically important. AIG's total assets have dropped to about $500bn from just over $1trn in 2007.
But on Friday 29 September, six members of the council voted in favour of rescinding AIG's SIFI status including Treasury Secretary Steven Mnuchin and Federal Reserve Chair Janet Yellen, whilst three members voted against the change.
"The Council has worked diligently to thoroughly re-evaluate whether AIG poses a risk to financial stability," Mnuchin said in a statement. "This action demonstrates our commitment to act decisively to remove any designation if a company does not pose a threat to financial stability."
The decision frees AIG from the heightened capital and regulatory requirements connected with SIFI status, with analysts suggesting that removal of AIG’s SIFI designation could relieve the company of an estimated $100mn-$150mn cost associated with complying with the SIFI regulation.
AIG president and CEO Brian Duperreault welcomed the verdict: “The Council’s decision reflects the substantial and successful de-risking that AIG’s employees have achieved since 2008. The company is committed to continued vigilant risk management and to working closely with our numerous regulators to enable a strong AIG to continue to serve our clients.”