GE Capital wants to apply in the first quarter of next year to shed a key U.S. regulatory designation it gained in the wake of the 2008 financial crisis, the head of General Electric Co.’s financing arm said on Tuesday.
“That’s our goal,” GE Capital Chief Executive Keith Sherin said in an interview. GE had previously said it would seek some time in 2016 to apply to remove its designation as a “systemically important” financial institution, or SIFI.
The SIFI designation comes with tougher and more costly rules enforced by the Federal Reserve to buffer the financial system should the firm collapse. Investors also are eager for GE to lose the designation so it can be more flexible with its balance sheet for uses such as share buybacks.
One of a few non-banks to be deemed a SIFI, GE in April announced it would unload some $200 billion in financing assets to focus more on being an industrial manufacturer.
On Tuesday, GE agreed to sell $30 billion worth of commercial lending and leasing businesses to Wells Fargo & Co., meaning GE has signed deals for almost all of its U.S. financing businesses up for sale.
“It was a priority of ours to sell the U.S. assets, and when we make the application to not be a SIFI I wanted to have the U.S. assets done,” Sherin said.
GE Capital gained the designation in 2013, but the path to losing the label is not entirely clear, Sherin said.
“We know why we were labeled systemic and we think that we are addressing those issues,” Sherin said. But he noted that “there’s no precedent and we’re in uncharted territory here.”
Recognizing GE Capital’s efforts to shrink, the Fed said in July it would roll out regulations in two phases.
The first phase, which begins in 2016, includes minimum capital and liquidity requirements, which the Fed said GE had already largely implemented. The second phase, beginning in 2018, includes stricter standards such as capital planning and, one year later, stress tests.
GE’s franchise finance unit, worth about $5.5 billion, is the only major U.S. financing business left to be sold under GE’s divestiture plan. The Wells transaction is expected to close in the first quarter.
In total, GE has reached deals on $126 billion worth of financing divestitures since April.