AIG to be designated as “too big to fail”

The American International Group Inc., or AIG, may be classified as “too big to fail” by a federal panel, which would result in a drastic increase in regulatory oversight of the insurer.

Under Dodd-Frank reforms, the Financial Stability Oversight Council is expected to designate AIG as a “systemically important financial institution,” or SIFI, Reuters reports.

AIG is currently in the Stage 3 review process for non-bank SIFIs. The FSOC identifies banks and non-bank institutions that are considered so large or otherwise important that their collage would cause repercussions to the economy.

In the third stage, factors that would “mitigate or aggravate” a company’s potential to cause harm are investigated, including its “resolvability, the opacity of its operations, its complexity, and the extent and nature of its existing regulatory scrutiny,” according to Reuters.

AIG has repeatedly said that it expects such a designation and has been preparing itself for such an eventuality. The company received approximately $182 billion in bailouts after it nearly failed four years ago.

The company did not have a primary regulator during much of its rescue period and, if designated as a SIFI, the Federal Reserve would become its regulator.

The U.S. Treasury sold more than $20 billion of AIG stock last month, reducing its ownership to 15.9 percent, Reuters reports.

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