By Sarah N. Lynch
WASHINGTON Oct 18 Prudential Financial
said it will not ask a federal court to overturn a designation
by the U.S. risk council that will subject the company to strict
capital requirements and oversight by the Federal Reserve.
The U.S. risk council designated Prudential Financial as
"systemically important," a tag that means the insurance firm is
so big and interconnected that its hypothetical collapse could
have a broad and negative effect across the entire market.
"The company will continue to work with the Board of
Governors of the Federal Reserve System and other regulators to
develop regulatory standards that take into account the
differences between insurance companies and banks, particularly
in the use of capital," the company said late Friday.
Prudential disclosed earlier this summer that the Financial
Stability Oversight Council, a new body of regulators created by
the 2010 Dodd-Frank law, had decided to label the company as a
"systemically important financial institution" or SIFI.
Prudential is one of only three non-bank financial firms so
far to be hit with the costly SIFI tag.
The other two companies, AIG International and GE
Capital, a unit of General Electric, did not appeal.
Certain large banks, including Goldman Sachs Group Inc
and Citigroup Inc automatically received the SIFI
At the time, Prudential vowed to fight the decision through
a closed-door hearing process before the FSOC. Prudential argued
that it is not too big to fail and that it would be wrong to
submit an insurer to regulation designed for banks.
The FSOC is chaired by Treasury Secretary Jack Lew and
comprised of the country's top financial market and banking
regulators. They are tasked with policing the marketplace for
potential emerging risks and have the power to classify large
firms that could topple markets as "SIFIs."
Any firm that is dubbed a SIFI will face higher capital
charges and other additional regulations.
After the FSOC met behind closed doors early this year to
consider Prudential's appeal of its designation, the company
revealed in September that a majority of FSOC members had still
voted in favor of designation.
Many outside experts expected the company might consider
appealing the decision in federal court.
Had the company decided to keep on fighting, it would have
been wading into uncharted legal territory.