American International Group Inc (NYSE:AIG) stature, a boon or a bane?
American International Group Inc (NYSE:AIG) and Allianz SE are amongst the group of insurers, who global financial rule makers deem systemically important. This means that they may be the companies that will eventually face tighter capital standards and more stringent regulation. MetLife Inc and Prudential Financial Inc in the U.S and Axa SA in France also feature on the list of insurers who are considered to be too big to fall or fail. This list of nine insurers was published by the Financial Stability Board, yesterday.
The 20-nation body
This body is a 20-nations group based in Basel, Switzerland. Mark Carney, the Governor of the Bank of England is the head of the FSB. He is coordinating responses of global regulators to the worst of financial crises that the world has faced since the infamous Great Depression. The objective of this exercise is to prevent a recurrence of the turbulence that followed the AIG bailout and the Lehman Brothers Holdings Inc collapse. The companies that feature on the FSB list are picked on the basis of criteria like their size, global activity as well as the non-insurance businesses that they have.
A matter of size
The Geneva Association is an insurance-lobby group that is based in this Swiss city. In a statement, it said that it seems that size is a major factor in this designation methodology. It added that the list actually overstates the importance of various top-ranked insurers in comparison with various other institutions. What insurers such as AIG and Prudential are expecting is that the FSB will eventually rely on U.S regulators to implement Global Systemically Important Insurers or G-SII. It is important for insurance companies to stay engaged in developing regulatory standards, both on the domestic and global level.
This is the only way to ensure that consumers are benefited and competition preserved. This month, a U.S regulator’s group with Jacob J Lew the Treasury Secretary at the helm, said that American International Group Inc (NYSE:AIG) is systemically important. In addition to everything the indication also is that its failure has the potential to threaten the financial system.