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GE Shrinks Finance Business, Appeals For Omitting SIFI Label

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(Credit: FREDERIC J. BROWN /AFP/Getty Images) A man is reflected on the black door of a General Electric (GE) refrigerator at a store selling electronics and appliances in Montebello, California on January 15, 2016. General Electric has sold to Chinese firm Haier its appliance business for $5.4 billion in a deal that is expected to greatly increase the Chinese firm's footprint in the United States.US-CHINA-GE-HAIER
April 1
10:22 PM 2016

General Electric (GE), a Fairfield, Connecticut-based multinational corporation, has appealed on Thursday to get released from supervision by the Federal Reserve. It has significantly shrunken its former massive financial services arm, posing no more systemic threat to the US financial system.

As a Fed declared Systematically Important Financial Institution (SIFI), GE needs to submit financial information to Fed staffs who allegedly rein in business leverage. These factors have led GE to pull out from most of its lending businesses. This part of GE business, until recent, has provided half of the conglomerate's profits, reports The Wall Street Journal.

GE has informed the Financial Stability Oversight Council (FSOC) on Thursday through a regulatory filing that it has its total assets in the financing division cut by more than half. The American conglomerate has eliminated majority of its US operations and omitted company's ties with rest of the financial system leading to keep hold the SIFI labeling, according to a report published in Fox Business.

An FSOC spokesman has welcomed the opportunity to evaluate developments at any designated non-bank financial company and their potential impacts on financial stability. FSOC will consider whether GE Capital continue to hold the label of SIFI, as part of its regular annual review over the companies it supervises. FSOC vows to continue acting within its legislative authority in protecting the US economy, reports MarketWatch quoting the FSOC spokesperson.

The remaining unit of GE Capital is smaller, simpler and less interconnected with the US financial system. It does not pose any conceivable threat to US financial stability.

GE has announced last April that its pivoting away from the financial services through selling most of GE Capital. It has reported $500 billion asset value for its lending business.

Since then, the conglomerate has signed agreements of selling lending businesses worth $168 billion against the preset goal of around $200 billion. Of the signed agreements, GE has announced last week a closing deal for $138 billion.

Breakup of the finance business has enabled GE Capital to send around $35 billion in dividends to its corporate parent subject to obtainment of approval from regulators. GE Capital's total assets have been slashed from $549 billion estimated in 2012 compared to $265 billion on Thursday, reveals the regulatory filing. The conglomerate owns $50 billion in finance assets remaining in the US.

As a SIFI, GE needs to submit financial information to the regulatory staffs who, in turn, intervenes in company leverage. Annoyed GE announced selling most of its assets to shrink the business in April last year. The conglomerate has appealed to FSOC to withdraw its SIFI status since the shrank GE can no longer pose threat to the US economy.

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