AIG 2013 Annual Report Download - page 43

We are regulated by the FRB and subject to its examination, supervision and enforcement authority and reporting
requirements as a SLHC and as a SIFI.
We are a SLHC within the meaning of the Home Owners’ Loan Act (HOLA). Because we were grandfathered as a
unitary SLHC within the meaning of HOLA when we organized AIG Federal Savings Bank and became a SLHC in
1999, we generally are not restricted under existing laws as to the types of business activities in which we may
engage, as long as AIG Federal Savings Bank continues to be a qualified thrift lender.
Dodd-Frank has effected comprehensive changes to the regulation of financial services in the United States and
subjects us to substantial additional federal regulation. The FRB supervises and regulates SLHCs, and the OCC
supervises and regulates federal savings associations, such as AIG Federal Savings Bank. Dodd-Frank directs
existing and newly-created government agencies and oversight bodies to promulgate regulations implementing the
law, an ongoing process that has begun and is anticipated to continue over the next few years.
Changes mandated by Dodd-Frank include directing the FRB to promulgate minimum capital requirements for
SLHCs. The FRB, the OCC and the Federal Deposit Insurance Corporation (FDIC) have established revised
minimum leverage and risk-based capital requirements, which are based on accords established by the Basel
Committee on Banking Supervision, that apply to bank holding companies and SLHCs, as well as to insured
depository institutions, such as AIG Federal Savings Bank. The requirements, however, do not apply to SLHCs that
are substantially engaged in insurance underwriting activities. The FRB expects to implement a capital framework for
SLHCs that are substantially engaged in insurance underwriting activities by the time covered SLHCs must comply
with the requirements in 2015.
As required by Dodd-Frank, the FRB has also proposed enhanced prudential standards (including minimum leverage
and risk-based capital requirements) for SIFIs and has stated its intention to propose enhanced prudential standards
for SLHCs pursuant to HOLA. We cannot predict whether the capital regulations will be adopted as proposed or what
enhanced prudential standards the FRB will promulgate for SLHCs, either generally or as applicable to insurance
businesses. Further, we cannot predict how the FRB will exercise general supervisory authority over us as a SIFI,
although the FRB could, as a prudential matter, for example, limit our ability to pay dividends, repurchase shares of
AIG Common Stock or acquire or enter into other businesses. We cannot predict with certainty the requirements of
the regulations ultimately adopted or how or whether Dodd-Frank and such regulations will affect the financial
markets generally, impact our businesses, results of operations, cash flows or financial condition, or require us to
raise additional capital or result in a downgrade of our credit ratings.
On July 8, 2013, AIG received notice from the U.S. Treasury that the Financial Stability Oversight Council (Council)
has made a final determination that AIG should be supervised by the FRB as a SIFI pursuant to Dodd-Frank. As a
SIFI, we are regulated by the FRB both in that capacity and, for as long as AIG continues to control an insured
depository institution, in our capacity as a SLHC. The regulations applicable to SIFIs and to SLHCs, when all have
been adopted as final rules, may differ materially from each other. AIG is working to restructure AIG Federal Savings
Bank into a trust-only thrift and deregister AIG as a SLHC.
As a SIFI, we anticipate we will be subject to:
• stress tests to determine whether, on a consolidated basis, we have the capital necessary to absorb losses due to
adverse economic conditions;
• stricter prudential standards, including stricter requirements and limitations relating to risk-based capital, leverage,
liquidity and credit exposure, as well as overall risk management requirements, management interlock prohibitions
and a requirement to maintain a plan for rapid and orderly resolution in the event of severe financial distress; and
• an early remediation regime process to be administered by the FRB.
Furthermore, if the Council were to make an additional separate determination that AIG poses a ‘‘grave threat’’ to
U.S. financial stability, we would be required to maintain a debt-to-equity ratio of no more than 15:1 and the FRB
may:
• limit our ability to merge with, acquire, consolidate with, or become affiliated with another company;
• restrict our ability to offer specified financial products;
Federal Reserve Supervision
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AIG 2013 Form 10-K 25
ITEM 1 / BUSINESS
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