AIG 2013 Annual Report Download - page 44

• require us to terminate specified activities;
• impose conditions on how we conduct our activities; and
• with approval of the Council, and a determination that the foregoing actions are inadequate to mitigate a threat to
U.S. financial stability, require us to sell or otherwise transfer assets or off-balance-sheet items to unaffiliated
entities.
As part of its general prudential supervisory powers, the FRB has the authority to limit our ability to conduct activities
that would otherwise be permissible for us to engage in if we do not satisfy certain requirements.
On December 10, 2013, the FRB, OCC, FDIC, SEC and CFTC adopted the final rule implementing Section 619 of
Dodd-Frank, referred to as the ‘‘Volcker Rule.’’ For as long as AIG Federal Savings Bank continues to be a qualified
thrift lender, we and our affiliates are considered banking entities for purposes of the rule and, after the end of the
rule’s conformance period in July 2015 (subject to extension by the FRB until 2017), would be prohibited from
‘‘proprietary trading’’ and sponsoring or investing in ‘‘covered funds,’’ subject to the rule’s exceptions. The term
‘‘covered funds’’ includes hedge, private equity or similar funds and, in certain cases, issuers of asset-backed
securities if such securities have equity-like characteristics. The Volcker Rule, as adopted, contains an exemption for
proprietary trading and ‘‘covered fund’’ sponsorship or investment by a regulated insurance company or its affiliate for
the general account of the regulated insurance company or a separate account established by the regulated
insurance company. Even if we no longer control an insured depository institution, however, Dodd-Frank authorizes
the FRB to subject SIFIs to additional capital requirements and quantitative limitations if they engage in activities
prohibited for banking entities under the Volcker Rule.
In addition, Dodd-Frank may also have the following effects on us:
• As a SIFI, we will be required to provide to regulators an annual plan for our rapid and orderly resolution in the
event of material financial distress or failure, which must, among other things, ensure that AIG Federal Savings
Bank is adequately protected from risks arising from our other entities and meet several specific standards,
including requiring a detailed resolution strategy and analyses of our material entities, organizational structure,
interconnections and interdependencies, and management information systems, among other elements.
• The Council may recommend that state insurance regulators or other regulators apply new or heightened
standards and safeguards for activities or practices that we and other insurers or other financial services
companies engage in.
• Title II of Dodd-Frank provides that a financial company whose largest United States subsidiary is an insurer (such
as us) may be subject to a special liquidation process outside the federal bankruptcy code. That process is to be
administered by the FDIC upon a coordinated determination by the Secretary of the Treasury, the director of the
Federal Insurance Office and the FRB, in consultation with the FDIC, that such a financial company is in default or
in danger of default and presents a systemic risk to U.S. financial stability.
• Dodd-Frank provides for significantly increased regulation of and restrictions on derivatives markets and
transactions that could affect various activities of AIG and its insurance and financial services subsidiaries,
including (i) regulatory reporting for swaps (which are regulated by the CFTC) and security-based swaps (which
are regulated by the SEC), (ii) mandated clearing through central counterparties and execution through regulated
exchanges or electronic facilities for certain swaps and security-based swaps and (iii) margin and collateral
requirements. Although the CFTC has not yet finalized certain requirements, many other requirements have taken
effect, such as swap reporting, the mandatory clearing of certain interest rate swaps and credit default swaps, and
the mandatory trading of certain swaps on swap execution facilities or exchanges starting in February 2014. The
SEC has proposed, but not yet finalized, rules with respect to the regulations and restrictions noted above. These
regulations have affected and may further affect various activities of AIG and its insurance and financial services
subsidiaries as rules are finalized to implement additional elements of the regulatory regime.
Volcker Rule
Other Effects of Dodd-Frank
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AIG 2013 Form 10-K26
ITEM 1 / BUSINESS
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