Last week, the US Financial Stability Oversight Counsel voted to remove its designation of GE Capital as a ‘systemically important’ financial institution following an aggressive program of asset offloading by the company. The decision to rescind the label, which essentially classed GE Capital as ‘too big to fail’, comes three years after the regulator decided to classify the company as one of four systemically important non-bank financial firms which could pose a threat to broader financial stability. It is the first time that the FSOC has withdrawn a ‘systemically important’ designation since the label was created under the Dodd-Frank financial overhaul law of 2010.

Building trust

Treasury secretary Jack Lew hopes that the decision to let GE Capital off the hook will help improve trust in the regulatory process: ‘Today’s decision clearly demonstrates that the Council’s designation of non-bank financial companies is a two-way process,’ he said. ‘The Council follows the facts: when it identifies a company that could threaten financial stability, it acts; when those risks change, the Council also acts.’

Culling risk

Since being given the tag in 2013, GE has pursued a massive $180bn slew of business asset sales in order to reduce the sprawling scope of its financial arm GE Capital. Since revealing plans for the mass-offloading, GE shares have added around $5.25 per unit, which translates into around $50bn in market capitalisation for the company. Details of the de-risking agenda and the case for GE Capital’s de-designation were set out in a formal submission to the FSOC on 30 March penned by GE general counsel Alex Dimitrief together with Sullivan & Cromwell senior chairman Rodgin Cohen and Davis Polk & Wardwell heavyweights Randall Guynn and Luigi De Ghenghi. ‘This was complicated stuff,’ Mr Dimitrief told BigLaw Business, adding that the 100-plus-page submission had been a ‘hard one to write.’

Opening doors

The FSOC decision to remove the designation will significantly loosen the rules placed on the industry conglomerate by the regulator. Mr Dimitrief praised his 4,500-strong legal team for securing the landmark victory for GE: ‘I would put the law firm at GE up against any law firm in the world… I can’t think of a better place to be,’ he said.

Sources: BigLaw Business; Financial Times; Wall Street Journal; New York Times