American International Group is now officially regulated as oneof the first two non-banks designated as systemicallyimportant.

The Financial Stability Oversight Council officiallyannounced it designated AIG and GE Capital assystemically important financial institutions(SIFIs) pursuant to the Dodd-Frank Wall Street Reform andConsumer Protection Act, says Jacob Lew, Treasurysecretary and FSOC chairman, in a statement late June 9.

Prudential Financial has appealed such a designationand the FSOC will hold a closed hearing within 30days.

The designation, effective Monday night, is in some ways aformality because AIG has been under consolidated supervision ofthe Federal Reserve Bank of New York as a savings and loan holdingcompany since last August, when it fell below the threshold ofhaving more than 50 percent of its stock owned by thegovernment.

The FSOC designation will bring with it higher standards thanmandated for thrift holding companies.

These will include capital standards and other prudentialstandards, higher liquidity requirements, tighter risk management,concentration limits and a requirement that it create a "livingwill," a process for liquidating the company if it faces solvencyproblems.

"Today, the FSOC has taken a decisive step to address threats toU.S. financial stability and create a safer and more resilientfinancial system," Lew said.

"These designations will help protect the financial system andbroader economy from the types of risks that contributed to thefinancial crisis.  The Council will continue to reviewadditional companies in the designations process, to addressremaining threats to financial stability."

AIG says it "did not contest this designation and welcomesit." 

The decision is historic, because no insurer has been federallyregulated for more than 150 years, according to recent testimony byan official of the Congressional Research Service.