The U.S. Financial Stability Oversight Council last week denied Prudential Financial Inc.'s appeal and designated the company as a systemically important financial institution (SIFI), which is credit neutral for the insurer, according to Fitch Ratings.
SIFIs are to be supervised by the U.S. Federal Reserve and subject to stricter regulatory standards.
“We note that, while designation is one thing, details of implementation and its impact of an undefined regulatory standard are another,” Fitch said. “Both remain very unclear.”
Prudential has the right to contest the designation by filing suit in U.S. federal court within 30 days. Fitch said that a lawsuit contesting the designation likely would be lengthy.
Prudential would be subject to increased capital requirements and higher costs associated with additional regulatory compliance requirements, Fitch said. The company’s U.S. life insurance subsidiaries maintains statutory capital levels in excess of current insurance regulatory minimums.
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