General Electric Company (NYSE:GE) has asked that the US government to de-list the company from the “too-big-to-fail” financial institution list, so that it can access the massive reserve capital it is required to hold because of its high-risk listing. The financial controls which the government deployed, post the 2008-9 crisis when major banks and institutions indulge in risky behaviour, requires that non-financial institutions which are named in the “too-big-to-fail” category have to maintain high reserves of capital so that a risky financial behaviour is offset by the reserve capital.
Shedding the tag by divesting
General Electric Company (NYSE:GE) CEO, Jeffrey Immelt had begun on a divesting trail nearly a year ago, following the government’s higher regulatory control over capital reserves. Much of the disinvestment came in the lending businesses it held in Europe and Far East.
With the divestment, Immelt has virtually rewritten GE’s business. He has nearly exited most businesses that previous CEO Jack Welch had built and replaced it with a lean, focused and agile heavy-machinery business General Electric Company (NYSE:GE).
Files Application
An application before the regulatory body- Financial Stability Oversight Council – to delist GE from the classification was officially filed on Thursday, according to reports.
CEO of GE’s Capital division, Keith Sherin stated that the company now meets SIFI requirements and hence qualify for removal from the FSOC tag.
This sentiment had independent analyst approval as well. Edward Jones, the analyst firm’s researcher Jeff Windau in a media interview stated that the company qualifies for a “relatively smooth process” for FSOC exit.
Releasing Cash is the goal
According to another analyst firm, RBC Capital Markets LLC, GE will be able to start on upstreaming its cash from GE capital to parent GE. And after SIFI tag too is removed, then GE will be able to leverage the balance sheet in favour of the parent.
General Electric Company (NYSE:GE) application comes a day after another insurance-giant won a court case for removal from the FSOC-lie Tag. Metlife Inc, won a court ruling for removal from the Systemically Important Company tag, allowing it to now access billions of dollars locked-up as reserve capital.