GE has filed a request to the Financial Stability Oversight Council (FSOC) for rescission of GE Capital’s designation as a non-bank Systemically Important Financial Institution (SIFI).
The manufacturer said that GE Capital has been completely transformed, primarily through the sale or split-off of most of its legacy financial services businesses, into a "small, simpler company" focused on customers and markets aligned with GE’s industrial businesses.
GE said the filing demonstrated that it had substantially reduced its risk profile and is significantly less interconnected to the financial system, and therefore does not pose any conceivable threat to US financial stability.
The request details the changes and dispositions GE Capital has made since being designated as a SIFI in 2013 and, in particular, since GE announced in April 2015 that it would become a more focused digital industrial company by dramatically reducing the size of GE Capital.
GE Capital has simplified and rationalized its structure and completed a significant reorganization. The company said these changes have reduced its complexity and enhanced its resolvability.
"GE Capital’s regulated operations are now centred in Europe. GE Capital has consolidated its non-US operations into GE Capital International Holdings Limited, whose operations are and will be prudentially supervised by the UK Prudential Regulation Authority for as long as prudential regulation is required," the company wrote.
GE Capital chairman and chief executive officer Keith Sherin: "Our submission details the complete transformation of GE Capital. Our plan to change our business model, shrink the Company and reduce our risk profile has been successful."
"We have completed over 80% of our projected asset reductions; exited leveraged lending and US consumer lending; exited nearly all middle market lending; reduced real estate debt by more than 75% and real estate equity by 100%; and reduced outstanding commercial paper almost 90%."
"We believe GE Capital no longer meets the criteria to be designated as a SIFI and we look forward to working cooperatively and constructively with the FSOC through the rescission process," added Sherin.
These are some of the key points in the application:
GE Capital has reduced its assets by 52%, from $549bn (485bn) to $265bn. Of the remaining $265bn in assets: $77bn are cash and cash-like investments, $36bn are assets related to run-off U.S. insurance activities, $153bn are therefore non-cash, non-insurance related assets. Only around $50bn of these assets are in the US.
GE Capital has materially reduced its use of short-term and securitization funding. Commercial paper (CP) is down 88%, from $43bn outstanding to $5bn, taking it from being the top issuer of US CP to representing less than one-tenth of 1% of the market. Securitization funding is down 90%, from $30bn to $3bn.