June 28, 2016

Basis for the Financial Stability Oversight Council’s

Rescission of Its Determination

Regarding GE Capital Global Holdings, LLC

TABLE OF CONTENTS

1. Introduction............................................................................................................................. 2

1.1 Council Rescission of Determination........................................................................... 2

1.2 Engagement with GE Capital and Its Regulators......................................................... 3

1.3 The Legal and Analytic Framework for a Rescission of a Final Determination.......... 3

1.4 Summary of 2013 Basis for Final Determination Regarding GE Capital .................... 5

1.5 Summary of Annual Reevaluation ............................................................................... 7

2. Summary of Developments at GE Capital Since the Council’s Final Determination ............ 9

2.1 Completed Divestitures.............................................................................................. 10

2.2 Transformed Funding Model...................................................................................... 10

2.3 Corporate Reorganization........................................................................................... 11

3. Analysis of the Potential Effects of Material Financial Distress at GE Capital ................... 11

3.1 Transmission Channel Analysis................................................................................. 11

3.1.1 Exposure Transmission Channel............................................................................. 12

3.1.2 Asset Liquidation Transmission Channel ............................................................... 17

3.1.3 Critical Function or Service Transmission Channel ............................................... 19

3.2 Existing Supervision and Regulation ......................................................................... 20

3.3 Resolvability............................................................................................................... 21

4. Conclusion ............................................................................................................................ 22

Appendix: Select GE Capital Financial Metrics........................................................................... 23
June 28, 2016

2

1. INTRODUCTION

1.1 Council Rescission of Determination

On July 8, 2013, the Financial Stability Oversight Council (Council) made a final determination,

pursuant to section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act

(Dodd-Frank Act), that material financial distress at General Electric Capital Corporation

(GECC), the predecessor of GE Capital Global Holdings, LLC (GE Capital),

1

could pose a threat 

to U.S. financial stability and that GE Capital shall be subject to supervision by the Board of

Governors of the Federal Reserve System (Board of Governors) and enhanced prudential 

standards. The Council released a public explanation of the basis for its final determination

(Basis for Final Determination).

2

At the time of the Council’s final determination, GE Capital, a wholly owned subsidiary of 

General Electric Corporation (GE), was one of the largest financial services companies in the 

United States, ranked by assets. GE Capital was also a significant source of credit to the U.S. 

economy, providing financing to more than 243,000 commercial customers, 201,000 small 

businesses through retail programs, and 57 million consumers in the United States.3

Since the Council’s final determination, GE Capital has fundamentally changed its business. 

Through a series of divestitures, a transformation of its funding model, and a corporate 

reorganization, the company has become a much less significant participant in financial markets 

and the economy. GE Capital has decreased its total assets by over 50 percent, shifted away 

from short-term funding, and reduced its interconnectedness with large financial institutions.

Further, the company no longer owns any U.S. depository institutions and does not provide

financing to consumers or small business customers in the United States.

For these reasons and those discussed below, the Council voted on June 28, 2016, to rescind its 

final determination that material financial distress at GE Capital could pose a threat to U.S. 

financial stability and that GE Capital shall be subject to supervision by the Board of Governors 

and enhanced prudential standards.

In its annual reevaluation, the Council considered a broad range of information available through 

public and regulatory sources, as well as information provided by GE Capital and its regulators. 

The Council’s decision to rescind its final determination was based on extensive quantitative and 

qualitative analyses regarding GE Capital.

 1 As part of a corporate reorganization completed in December 2015, discussed further below, GECC merged into its 

parent company, General Electric Company, and all of the assets and businesses of GECC were transferred to a 

newly created wholly owned subsidiary of GE, GE Capital. GE Capital succeeded to and became subject to the 

Council’s final determination regarding GECC. References to GE Capital include GECC unless otherwise noted. 2 Basis of the Financial Stability Oversight Council’s Final Determination Regarding General Electric Capital 

Corporation (July 8, 2013), available at

https://www.treasury.gov/initiatives/fsoc/designations/Documents/Basis%20of%20Final%20Determination%20Reg

arding%20General%20Electric%20Capital%20Corporation,%20Inc.pdf. 3 Basis for Final Determination, p. 2.
June 28, 2016

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1.2 Engagement with GE Capital and Its Regulators

Beginning in early 2015, GE Capital began meeting periodically with staff of Council members 

and member agencies regarding strategic actions the company intended to take and the effect 

those actions could have in reducing the potential risks GE Capital could pose to financial 

stability. On March 18, 2016, the Council notified GE Capital that the Council was conducting 

its third annual reevaluation of its final determination regarding the company. The Council 

invited the company to meet with staff and to submit materials for consideration by the Council. 

On March 31, 2016, GE Capital made a written submission to the Council, requesting that the 

Council rescind its final determination, and in April 2016, staff of Council members and member 

agencies met with the company. Staff of Council members and member agencies also consulted

with several of the company’s regulators: the Board of Governors, the Federal Deposit Insurance 

Corporation (FDIC), and the U.K. Prudential Regulation Authority (PRA). In addition, in 

response to questions from staff of Council members and member agencies, GE Capital 

submitted supplemental information to the Council in May and June 2016.

On June 28, 2016, the Council voted to rescind its final determination regarding GE Capital and 

provided the company with a detailed statement of the basis for the Council’s decision. The 

statement of the basis for the rescission of the final determination that the Council provided to 

GE Capital relies on nonpublic information that GE Capital submitted to the Council. The 

Council is subject to statutory and regulatory requirements to maintain the confidentiality of 

certain information submitted to it in connection with the review of a nonbank financial 

company.4

 As a result, this public explanation of the basis for the Council’s rescission of its 

final determination excludes confidential nonpublic information but addresses the key factors 

that the Council considered in its reevaluation of GE Capital and the primary reasons for the 

Council’s rescission of its final determination. This explanation of the basis is intended to 

provide the public with an understanding of the Council’s analysis while protecting sensitive, 

confidential information submitted by GE Capital and its regulators to the Council.

1.3 The Legal and Analytic Framework for a Rescission of a Final Determination 

The Council was established in 2010 with three purposes: to identify risks to U.S. financial 

stability; to promote market discipline; and to respond to emerging threats to the stability of the 

United States financial system.5 To address potential risks to U.S. financial stability, the DoddFrank Act authorizes the Council to determine that certain nonbank financial companies shall be 

supervised by the Board of Governors and subject to enhanced prudential standards.6 

The Council may make such a determination if the Council determines that (1) material financial 

distress at the nonbank financial company could pose a threat to the financial stability of the

United States (the first determination standard) or (2) the nature, scope, size, scale, 

 4 Dodd-Frank Act section 112(d)(5), 12 U.S.C. § 5322(d)(5); 12 C.F.R. part 1310.20(e). The nonpublic statement of 

the basis of the Council’s decision that the Council provided to GE Capital constitutes part of the Council’s 

administrative record regarding GE Capital. That analysis includes information such as confidential information 

regarding GE Capital’s investments and the counterparties to GE Capital’s derivative positions. 5 Dodd-Frank Act section 111, 12 U.S.C. § 5321. 6 Dodd-Frank Act section 113(a), 12 U.S.C. § 5323(a).
June 28, 2016

4

concentration, interconnectedness, or mix of the activities of the nonbank financial company

could pose a threat to the financial stability of the United States (the second determination 

standard).7 The Council may subject a nonbank financial company to supervision by the Board 

of Governors and enhanced prudential standards if either the first determination standard or 

second determination standard is met.8

In considering whether to make a determination that a nonbank financial company will be 

supervised by the Board of Governors and subject to enhanced prudential standards, the Council 

is required to consider ten statutory factors.

9 The Council also adopted a rule and interpretive 

guidance (Rule and Interpretive Guidance) that describe the manner in which the Council applies 

the statutory standards and considerations, and the processes and procedures that the Council 

follows, in making determinations under section 113 of the Dodd-Frank Act.10 The Rule and 

Interpretive Guidance describe the factors that the Council intends to use when analyzing 

companies at various stages of the determination process, including sample metrics. The 

Council also adopted supplemental procedures relating to nonbank financial company 

determinations (Supplemental Procedures).

11 In conducting its reevaluation of its determination 

that material financial distress at GE Capital could pose a threat to U.S. financial stability, the 

Council considered each of the statutory considerations in section 113 of the Dodd-Frank Act 

and all of the facts of record. 

The Interpretive Guidance also defines statutory terms relevant to the determinations process. 

The Interpretive Guidance states that the Council will consider a “threat to the financial stability 

of the United States” to exist “if there would be an impairment of financial intermediation or of 

financial market functioning that would be sufficiently severe to inflict significant damage on the 

 7 Dodd-Frank Act section 113(a), 12 U.S.C. § 5323(a). 8 See Dodd-Frank Act section 113(a), 12 U.S.C. § 5323(a). The Council made its final determination with respect to 

GE Capital under the first determination standard. In evaluating GE Capital under the first determination standard, 

the Council considered each of the statutory considerations in section 113 of the Dodd-Frank Act, including the 

nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of GE Capital. The Council 

would consider these same statutory considerations under the second determination standard. During the

reevaluation of the Council’s final determination regarding GE Capital, no factors were identified that would 

indicate that the company would meet the second determination standard. 9 The ten statutory factors are: (1) the extent of the leverage of the company; (2) the extent and nature of the offbalance-sheet exposures of the company; (3) the extent and nature of the transactions and relationships of the 

company with other significant nonbank financial companies and significant bank holding companies; (4) the 

importance of the company as a source of credit for households, businesses, and State and local governments and as 

a source of liquidity for the United States financial system; (5) the importance of the company as a source of credit 

for low-income, minority, or underserved communities, and the impact that the failure of such company would have 

on the availability of credit in such communities; (6) the extent to which assets are managed rather than owned by 

the company, and the extent to which ownership of assets under management is diffuse; (7) the nature, scope, size, 

scale, concentration, interconnectedness, and mix of the activities of the company; (8) the degree to which the 

company is already regulated by 1 or more primary financial regulatory agencies; (9) the amount and nature of the 

financial assets of the company; and (10) the amount and types of the liabilities of the company, including the 

degree of reliance on short-term funding. The Council may also consider any other risk-related factors that it deems 

appropriate. Dodd-Frank Act section 113(a)(2), 12 U.S.C. § 5323(a)(2). 10 12 C.F.R. part 1310. 11 Supplemental Procedures Relating to Nonbank Financial Company Determinations (Feb. 4, 2015) available at 

https://www.treasury.gov/initiatives/fsoc/designations/Documents/Supplemental%20Procedures%20Related%20to

%20Nonbank%20Financial%20Company%20Determinations%20-%20February%202015.pdf.
June 28, 2016

5

broader economy.”12 The Interpretive Guidance also reflects the belief of the Council that 

“material financial distress” exists when a nonbank financial company “is in imminent danger of 

insolvency or defaulting on its financial obligations.”13 

The Council is required to review each final determination under section 113 of the Dodd-Frank 

Act not less frequently than annually and rescind the determination if the Council, by a vote of 

not fewer than two-thirds of the voting members then serving, including an affirmative vote by 

the Chairperson of the Council, determines that the nonbank financial company no longer meets 

the statutory standards for a determination.14 This reevaluation was conducted in accordance 

with the Dodd-Frank Act, the Rule and Interpretive Guidance, and the Supplemental Procedures. 

In light of the Council’s extensive and detailed findings at the time of a final determination, and 

the frequency of the annual reevaluations, it is appropriate for annual reevaluations to focus on 

changes, whether at the company, the markets in which it operates, or otherwise, that could 

affect the Council’s conclusion that material financial distress at the company could pose a threat 

to U.S. financial stability.15 

Current financial information referred to herein is generally presented on the basis of the 

company’s reporting to the Board of Governors, as of December 31, 2015, as adjusted to reflect 

sales and other material actions completed by the company between January 1, 2016, and March 

31, 2016, and the assumption of GE Capital Bank’s remaining deposits by Goldman Sachs Bank 

USA, which closed on April 18, 2016.

16 These adjusted figures are referred to as “2015 

Adjusted.”

1.4 Summary of 2013 Basis for Final Determination Regarding GE Capital

In evaluating GE Capital before making a final determination in 2013, the Council assessed how 

the company’s material financial distress could be transmitted to other firms or markets, thereby 

causing a broader impairment of financial intermediation or of financial market functioning. An 

impairment of financial intermediation and financial market functioning can occur through 

several channels. In the Interpretive Guidance, the Council identified the following channels as 

most likely to facilitate the transmission of the negative effects of a nonbank financial company’s 

material financial distress to other financial firms and markets:

17

• Exposure. Through this transmission channel, the Council evaluates whether a nonbank 

financial company’s creditors, counterparties, investors, or other market participants have 

exposure to the company that is significant enough to materially impair those creditors, 

 12 12 C.F.R. part 1310, app. A, II.a. 13 12 C.F.R. part 1310, app. A, II.b. 14 Dodd-Frank Act section 113(d), 12 U.S.C. § 5323(d). 15 See 77 Fed. Reg. 21,637, 21,650 (April 11, 2012). 16 See GE, Press Release, GE Completes Sale of Online Deposit Platform and Transfer of Remaining U.S. Deposits 

to Goldman Sachs Bank USA (April 18, 2016), available at 

http://www.businesswire.com/news/home/20160418005842/en/GE-Completes-Sale-Online-Deposit-PlatformTransfer. 17 12 C.F.R. part 1310, app. A, II.a.
June 28, 2016

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counterparties, investors, or other market participants and thereby pose a threat to U.S. 

financial stability. 

• Asset liquidation. The Council assesses whether a nonbank financial company holds 

assets that, if liquidated quickly, could cause a fall in asset prices and thereby 

significantly disrupt trading or funding in key markets or cause significant losses or 

funding problems for other firms with similar holdings in its evaluation of this 

transmission channel.

• Critical function or service. The evaluation of this transmission channel considers the 

potential effects if a nonbank financial company is no longer able or willing to provide a 

critical function or service that is relied upon by market participants and for which there 

are no ready substitutes.

In addition to these three transmission channels, the Interpretive Guidance notes that the threat a 

nonbank financial company may pose to U.S. financial stability may be exacerbated if the 

company is sufficiently complex, opaque, or difficult to resolve in bankruptcy such that its 

resolution in bankruptcy would disrupt key markets or have a material adverse impact on other 

financial firms or markets.18 A company’s resolvability may mitigate or aggravate the potential 

for the company to pose a threat to U.S. financial stability.19

At the time of its final determination, the Council concluded that the threat to U.S. financial 

stability posed by GE Capital’s material financial distress arose primarily from the exposure and 

asset liquidation transmission channels, although the Council also concluded that the critical 

function channel may exacerbate the extent to which the company’s material financial distress 

could be transmitted to the financial system and broader economy.

Regarding the exposure transmission channel, in 2013, the Council analyzed GE Capital’s 

significant reliance on short-term wholesale funding, particularly its issuance of commercial 

paper (CP). The Council found that GE Capital was the largest participant in the U.S. CP 

market, with $43 billion in outstanding CP and a market share of 3.3 percent. The Council 

determined that the generally risk-averse investors in this market could quickly withdraw their 

investments if GE Capital failed to meet its obligations. In addition, the majority of the investors 

in GE Capital’s CP were large, interconnected financial institutions, including money market 

mutual funds (MMFs), and the transmission of GE Capital’s distress to these counterparties 

could significantly impair functioning of the CP market. For example, MMFs held significant 

amounts of GE Capital’s CP, and the Council found that GE Capital’s material financial distress 

could lead a number of MMFs to “break the buck,” which could lead to a run on MMFs and a 

broader withdrawal of investments from the CP market and other short-term funding markets.20 

Moreover, because large, global banks fund themselves in part through short-term funding 

 18 12 C.F.R. part 1310, app. A, II.a. 19 12 C.F.R. part 1310, app. A, III.c. 20 An MMF has “broken the buck” (i.e., re-priced its securities below $1.00 per share) if it is unable to maintain a 

stable net asset value per share based on pricing of its portfolio holdings. On July 23, 2014, the Securities and 

Exchange Commission (SEC) adopted MMF reforms that include a floating net asset value (NAV) requirement for 

institutional prime MMFs. See 79 Fed. Reg. 47,736 (Aug. 14, 2014). The MMF reforms do not require a floating 

NAV for certain funds, including retail MMFs. The reforms, however, generally take effect in October 2016. 
June 28, 2016

7

markets, the Council determined that a withdrawal of funding from those markets could impair 

those firms’ ability to serve as financial intermediaries, thereby transmitting financial distress to 

other firms and financial markets more broadly. The Council also identified GE Capital’s longterm debt, securitization debt, derivatives activities, and maintenance of credit lines as increasing 

the aggregate exposures of other large financial institutions to GE Capital.21

Regarding the asset liquidation transmission channel, the Council noted that GE Capital held a 

large portfolio of assets comparable to those of the largest financial institutions. Given the size 

and composition of GE Capital’s asset portfolio, the Council found that a rapid sale of assets by 

GE Capital in the event of its material financial distress could depress the value of similar assets 

held by other significant market participants, leading to broader fire sales. The Council found 

that the resulting sales could reduce credit availability and impair key markets. Furthermore, the 

Council concluded that GE Capital’s significant reliance on wholesale funding could force GE 

Capital, in the event of its distress, to reduce the credit it provided to commercial institutions and 

consumers or to sell assets in order to meet its obligations if the company were unable to access 

wholesale funding markets.22

Regarding the critical function or service transmission channel, the Council found that GE 

Capital was one of the largest lenders in the areas of middle market commercial lending and 

leasing, consumer revolving credit, and aviation. As of year-end 2012, GE Capital provided

financing to more than 243,000 commercial customers, 201,000 small businesses through retail 

programs, and 57 million consumers in the United States. The Council concluded that material 

financial distress at GE Capital that limited its ability to continue to provide credit in these

markets, particularly during a period of overall stress in the financial services industry and in a 

weak economic environment, could adversely affect borrowers in those markets.23

The Council also considered the degree to which GE Capital was already regulated by one or 

more primary financial regulatory agencies. The Council noted that GE Capital was subject to 

consolidated supervision by the Board of Governors as a savings and loan holding company

(SLHC) but that the Council and Board of Governors would have additional authorities with 

respect to GE Capital if the Council made a final determination regarding the company under 

section 113 of the Dodd-Frank Act.24

The Council also concluded that GE Capital’s complexity, intra-firm connections, and potential 

difficulty to resolve aggravated the risk that the company’s material financial distress could 

materially impair financial intermediation and financial market functioning.

25

1.5 Summary of Annual Reevaluation

Since the Council’s final determination, GE Capital has fundamentally changed its business. 

Through a series of divestitures—including the complete exit of its U.S. banking and consumer 

 21 Basis for Final Determination, pp. 6-7. 22 Basis for Final Determination, pp. 7-8. 23 Basis for Final Determination, pp. 8-9. 24 Basis for Final Determination, pp. 9-10. 25 Basis for Final Determination, pp. 10-11.
June 28, 2016

8

operations—a transformation of its funding model, and a corporate reorganization, the company 

has become a much less significant participant in financial markets and the economy. Since 

2012, GE Capital has decreased its total assets by over 50 percent, substantially reduced its 

reliance on short-term funding, and limited its interconnectedness with large financial 

institutions.

26

With respect to the exposure transmission channel, GE Capital has significantly reduced its use 

of short-term wholesale funding and the exposures of large financial institutions to the company. 

Since the end of 2012, GE Capital’s outstanding CP has decreased by 88 percent, and its share of 

the U.S. CP market has decreased significantly, from 3.3 percent (when it was the largest issuer 

of U.S. CP) to less than 0.1 percent.

In addition, on–balance sheet exposures of large financial institutions, including global 

systemically important banks (G-SIBs), to GE Capital have declined since 2012, as GE Capital 

has reduced its outstanding CP, long-term debt, and securitization debt. GE Capital has also 

replaced its previous direct lines of credit with 54 financial institutions with one line of credit 

with GE. GE, in turn, has lines of credit with 44 financial institutions, and large financial 

institutions are indirectly exposed to GE Capital as a result of GE Capital’s ability to draw on its 

line of credit with GE. The assumption and guarantee of GE Capital’s outstanding long-term 

debt and CP by GE further mitigate market participants’ direct exposures to GE Capital. Finally, 

GE Capital’s smaller size, the company’s limited scale of activities in key funding markets, the 

decreased direct and indirect exposures to the company, and GE’s assumption and guarantee

substantially reduce the risk that GE Capital’s material financial distress could spread contagion 

in U.S. financial markets.

With respect to the asset liquidation transmission channel, the company has reduced its reliance 

on short-term funding27 sources by 86 percent, significantly reducing the potential for GE 

Capital’s material financial distress to necessitate large-scale asset liquidations. In addition, the

composition of GE Capital’s asset portfolio has diverged from those of the largest U.S. bank 

holding companies (BHCs), reducing the potential for asset sales by GE Capital to impair large 

financial market intermediaries. For example, the company’s portfolio of financing receivables 

has decreased by 74 percent since 2012. Further, since 2012, GE Capital has significantly 

reduced the size of its balance sheet and increased its available highly liquid assets, thus 

substantially reducing the amount of assets that GE Capital could be forced to sell to satisfy its 

obligations in the event of its material financial distress.

 26 On March 31, 2016, GE released a public summary of its more detailed written submission to the Council. GE, 

Summary of GE Capital’s SIFI Rescission Request (March 31, 2016), available at 

https://www.genewsroom.com/sites/default/files/media/201603/GE%20Capital%20Summary%20Public%20Resciss

ion%20Submission%20Final.pdf (GE Rescission Request Summary). This explanation of the basis excludes 

confidential information submitted to the Council by the company and instead relies in part on information in the 

GE Rescission Request Summary. 

27 Short-term funding referred to herein includes CP, GE “Interest Plus” obligations, federal funds purchased, 

securities sold under agreements to repurchase, and deposits. GE Interest Plus obligations were senior unsecured 

debt generally issued to retail investors by GE Capital; GE Capital closed the program as of August 31, 2015. See

GE Capital, Prospectus Supplement (July 3, 2012); GE Capital, GE Capital Invest Direct, available at 

http://www.gecapitalinvestdirect.com/.
June 28, 2016

9

With respect to the critical function or service transmission channel, GE Capital has greatly 

reduced its role in the economy through its divestitures of financing receivables and by 

eliminating its lending to small businesses and consumers in the United States. The company 

continues to be a leader in the aviation leasing market, but, in the aggregate, the potential risks 

arising through the critical function channel have substantially declined.

As to regulatory scrutiny, because the Council has rescinded its final determination with respect 

to GE Capital, the company is no longer subject to consolidated supervision in the United States.

The company’s non-U.S. entities are subject to the consolidated supervision of the U.K. PRA as 

long as it maintains U.K. banking assets or the consolidated supervision of a European Union 

(EU) host country for as long as the company retains credit institutions in the EU.

Finally, GE Capital has taken steps to become a simpler organization since the Council’s final 

determination. Among other things, the company has substantially reduced the number of its 

legal entities and established two direct subsidiaries, a domestic holding company to hold the 

company’s U.S. assets and conduct its U.S. operations, and a European holding company to hold 

the company’s non-U.S. assets and conduct its non-U.S. operations. Except with respect to 

intercompany services and certain intercompany debt, GE Capital has largely separated its U.S. 

and non-U.S. assets and operations from each other through this recent reorganization. 

Nonetheless, GE Capital remains a complex financial company with entities operating in many

countries, and its interconnections and complexities could pose potential challenges to a rapid 

and orderly resolution in bankruptcy.

Based on its analysis, the Council has concluded that changes at GE Capital since the Council’s 

final determination have significantly reduced the potential for the negative effects of material 

financial distress at GE Capital to be transmitted through each of the three transmission channels. 

As a result of these and other factors described below, the Council has rescinded its final 

determination that material financial distress at GE Capital could pose a threat to U.S. financial 

stability and that GE Capital shall be subject to supervision by the Board of Governors and 

enhanced prudential standards.

2. SUMMARY OF DEVELOPMENTS AT GE CAPITAL SINCE THE COUNCIL’S 

FINAL DETERMINATION

A number of material changes at GE Capital since the Council’s final determination have 

fundamentally altered the company. On April 10, 2015, GE announced a plan to divest a 

majority of GE Capital’s assets and focus on serving three primary business lines at GE.28 These 

transactions have included three main components: (1) divestitures, (2) the transformation of GE 

Capital’s funding model, and (3) a significant corporate reorganization.

GE Capital described four principal considerations underlying its decision to exit from certain 

businesses, including: the change in the market environment and business model for a large, 

wholesale-funded finance company; the initial public offering of Synchrony Financial 

(Synchrony) and other previous transactions that indicated that some of GE Capital’s assets 

 28 GE Capital, Quarterly Report on Form 10-Q for the period ended Sept. 30, 2015, p. 6.
June 28, 2016

10 

would be more valuable under other ownership; favorable market conditions for the financial 

assets to be divested; and the potential financial benefits of aligning GE Capital’s activities more 

closely with GE’s industrial businesses.29 

2.1 Completed Divestitures

Since 2012, GE Capital has divested approximately $272 billion of bank and nonbank assets.30 

GE Capital began divesting assets in 2013, and the majority of dispositions have occurred 

subsequent to the Council’s previous annual reevaluation of its determination regarding GE 

Capital. The largest transaction involved the initial public offering and share exchange of 

Synchrony, representing $87 billion in assets.31 In addition, GE Capital has sold $14 billion in 

non-U.S. bank assets, $24 billion of nonbank consumer financing businesses and assets, $99 

billion of global commercial lending and leasing businesses and assets, and $50 billion of 

commercial real estate assets since 2012.32

2.2 Transformed Funding Model

GE Capital has transformed its funding model. Among the most significant changes is its greatly 

reduced use of and reliance on short-term funding. GE Capital’s use of short-term funding 

sources has fallen 86 percent, from $98 billion as of year-end 2012 to $14 billion as of 2015 

Adjusted.33 In particular, the company’s outstanding CP has declined from $43 billion as of 

year-end 2012 to $5 billion as of 2015 Adjusted.34 In addition, deposits and securitization debt 

have fallen by 80 percent and 90 percent, respectively, since December 31, 2012.35

As a result, the company now relies more on long-term debt, which is equal to 57 percent of 

assets, up from 49 percent as of year-end 2012.36 However, the outstanding amount of long-term 

debt has also declined substantially, from $269 billion as of year-end 201237 to $159 billion as of 

March 31, 2016.38

In addition, in April 2015, GE guaranteed substantially all of GE Capital’s long-term debt and 

CP.

39 Subsequently, GE assumed GE Capital’s outstanding U.S. long-term debt and established 

a payable between GE Capital and GE under which GE Capital agreed to make payments to GE 

 

29 GE Capital, Investor Presentation, GE Capital Strategy (April 10, 2015), p. 5, available at 

http://www.ge.com/sites/default/files/ge webcast presentation 04102015 0.pdf. 30 GE Rescission Request Summary, p. 5. 31 GE Rescission Request Summary, p. 5. 32 GE Rescission Request Summary, p. 5. 33 GE Rescission Request Summary, p. 2. 34 GE Rescission Request Summary, p. 6. 35 GE Rescission Request Summary, p. 6. 36 GE Capital, Annual Report on Form 10-K for the period ended Dec. 31, 2012, pp. 94, 134. GE, Quarterly Report 

on Form 10-Q for the period ended March 31, 2016, pp. 59, 77. 37 GE Capital, Annual Report on Form 10-K for the period ended Dec. 31, 2012, pp. 94, 134. 38 GE, Quarterly Report on Form 10-Q for the period ended March 31, 2016, pp. 59, 77. On April 15, 2016, $16.4 

billion of GE Capital’s long-term debt matured. GE, Quarterly Report on Form 10-Q for the period ended March 

31, 2016, p. 78.

39 GE Rescission Request Summary, p. 2; GE, Annual Report on Form 10-K for the period ended Dec. 31, 2015, p. 

165.
June 28, 2016

11

to service the assumed debt.40 The amount outstanding under the payable was $74 billion as of 

March 31, 2016.41 At the time, GE also assumed GE Capital’s outstanding CP, although that CP 

has since matured; new CP issued by GE Capital’s subsidiaries is guaranteed by GE.42

2.3 Corporate Reorganization

GE Capital now consists primarily of the following three business lines, which are aligned with 

certain of GE’s industrial businesses:

43

• GE Capital Aviation Services, a global aircraft lessor and lender that provides financing 

solutions to the global airline industry.

• Energy Financial Services, an energy finance business that originates and invests in 

projects that generally involve GE’s equipment or services.

• Industrial Finance, a new business line that serves GE’s industrial businesses and their 

customers.

In addition, GE Capital substantially reorganized the company’s legal entity structure. The 

reorganization involved the merger of GE Capital into GE and the transfer of all of GE 

Capital’s assets and businesses to a new intermediate holding company, GE Capital. GE 

Capital has two direct subsidiaries, a U.S. holding company that owns its U.S. assets and 

conducts its U.S. operations, and a European holding company that owns its non-U.S. assets 

and conducts its non-U.S. operations.44

3. ANALYSIS OF THE POTENTIAL EFFECTS OF MATERIAL FINANCIAL 

DISTRESS AT GE CAPITAL

3.1 Transmission Channel Analysis

The Council considered the effects of changes at GE Capital since the final determination on 

each of the three channels for the transmission of distress: (1) exposure, (2) asset liquidation, and 

(3) critical function or service. In evaluating whether material financial distress at GE Capital

could be transmitted to other firms and markets through the transmission channels to a degree 

that could cause a broader impairment of financial intermediation or of financial market 

functioning, the Council considered the statutory factors set forth in section 113 of the DoddFrank Act. 

 40 GE Rescission Request Summary, p. 2; GE, Annual Report on Form 10-K for the period ended Dec. 31, 2015, p. 

165.

41 GE, Quarterly Report on Form 10-Q for the period ended March 31, 2016, p. 78. 42 GE Rescission Request Summary, p. 2; GE, Annual Report on Form 10-K for the period ended Dec. 31, 2015, pp. 

79, 165.

43 GE Rescission Request Summary, p. 2. 44 GE Rescission Request Summary, p. 2.
June 28, 2016

12

3.1.1 Exposure Transmission Channel

At the time of its final determination regarding GE Capital, the Council found that other large 

financial institutions had significant exposures to GE Capital. A significant source of those 

exposures was GE Capital’s reliance on short-term wholesale funding and its significant role in 

the short-term wholesale funding market, particularly in the CP market. 

Since the Council’s final determination, GE Capital has substantially reduced both its use of 

short-term wholesale funding and large financial institutions’ direct and indirect exposures to GE 

Capital. GE has also assumed or guaranteed GE Capital’s outstanding long-term debt and CP, 

mitigating market participants’ direct exposures to GE Capital. Further, GE Capital has replaced 

its previous direct lines of credit with a large number of financial institutions with one line of 

credit with GE, although GE Capital’s ability to use its line of credit with GE could still

indirectly increase liquidity strains on the third-party lenders to GE. Finally, GE Capital’s 

smaller size, the decreased direct and indirect financial exposures to the company, the company’s 

limited activities in key funding markets, and GE’s assumption and guarantee of GE Capital’s 

debt substantially decrease the potential for GE Capital’s material financial distress to spread 

contagion in financial markets. Taken together, as described below, these changes significantly 

reduce the potential negative effects that could arise through the exposure transmission channel

as a result of GE Capital’s material financial distress.

GE Support of GE Capital

In April 2015, GE guaranteed the vast majority of GE Capital’s unsecured debt and CP.

45 In 

December 2015, GE assumed GE Capital’s outstanding U.S. long-term debt and CP.

46 GE 

Capital agreed to make payments to GE to service the assumed debt. As a result, the vast 

majority of GE Capital’s borrowings have been either assumed or guaranteed by GE.

GE’s guarantee and assumption are substantial developments that significantly mitigate the risks 

arising from exposures to GE Capital’s outstanding indebtedness in the event of GE Capital’s 

material financial distress. External holders of GE Capital’s long-term debt and CP are generally 

no longer exposed to direct credit risk arising from a default by GE Capital in the event of its 

material financial distress. Instead, they are exposed to the credit risk of GE. This arrangement 

mitigates the risks posed by these exposures to GE Capital unless GE, an industrial company, is 

experiencing financial distress at the same time as GE Capital. Moreover, due to other changes 

at GE Capital since early 2015, GE Capital’s material financial distress is less likely to materially 

impair GE because GE Capital represents a smaller proportion of GE’s business mix and GE 

Capital is significantly less reliant on short-term funding.

Commercial Paper

At the time of the Council’s final determination regarding GE Capital, the Council concluded 

that due to GE Capital’s significant role in the short-term wholesale funding market, the 

company’s material financial distress could impose losses on CP holders and could prompt a loss 

 45 GE, Annual Report on Form 10-K for the period ended Dec. 31, 2015, p. 82. 46 GE, Annual Report on Form 10-K for the period ended Dec. 31, 2015, p. 79.
June 28, 2016

13

of investor confidence in the CP market, potentially disrupting short-term funding markets and 

impairing financial intermediation or financial market functioning.47

As of December 31, 2012, GE Capital had $43 billion of CP outstanding.48 At the time, the 

company was the largest participant in the U.S. CP market, with a market share of 3.3 percent.49 

In addition, at the time of the Council’s final determination, most holders of GE Capital’s CP 

were large, interconnected financial institutions, including MMFs.50 The Council found that if 

the company were to experience material financial distress, a large number of MMFs could 

“break the buck,” which could aggravate any runs on the CP market by contributing to a run on 

MMFs and a broader withdrawal of investments from the CP market and other short-term 

funding markets.

Since the Council’s final determination, GE Capital has significantly reduced its CP program, 

decreasing its outstanding CP by 88 percent, to $5 billion.51 The company’s significant 

reduction in outstanding CP and its less prominent position as an issuer in the CP market sharply 

reduce the risk that GE Capital’s material financial distress could lead to disruptions in the 

broader U.S. CP market.

In addition, the mix of holders of the company’s CP has shifted significantly. As of December 

31, 2015, no MMFs held GE Capital’s CP.

52 As a result, no MMFs could “break the buck” due 

to GE Capital’s material financial distress, and the potential for GE Capital’s distress to spread to 

other firms and markets through the exposure transmission channel has been greatly reduced.

Finally, as described above, GE Capital’s outstanding CP is now guaranteed by GE, which

further mitigates the risk that direct or indirect exposures to GE Capital’s CP could impair shortterm funding markets. 

These significant changes in the company’s funding model materially reduce the potential risks 

to U.S. financial stability posed by GE Capital’s use of short-term wholesale funding.

Long-Term Debt

As of December 31, 2012, GE Capital had approximately $269 billion of outstanding unsecured 

long-term debt, with $44 billion maturing within one year and $167 billion maturing within five 

years.53 At the time of the Council’s final determination, the Council found that exposures to GE 

Capital arising from GE Capital’s outstanding debt could lead to a transmission of stress to the 

holders of those obligations in the event of the company’s material financial distress.

Since the Council’s final determination, GE Capital has reduced its outstanding unsecured longterm debt by 41 percent, to $159 billion, of which $43 billion represented the current portion of 

 47 Basis for Final Determination, p. 7. 48 GE Rescission Request Summary, p. 6.

49 GE Rescission Request Summary, p. 6. 50 Basis for Final Determination, p. 7. 51 GE Rescission Request Summary, p. 6. 52 GE Rescission Request Summary, p. 6. 53 GE Capital, Annual Report on Form 10-K for the period ended Dec. 31, 2012, pp. 90-91.
June 28, 2016

14

long-term debt and was due within one year.54 Scheduled maturities on GE Capital’s long-term 

debt are substantially lower going forward, averaging approximately $15 billion per year through

2019.55

The significant decline in GE Capital’s outstanding long-term debt has substantially reduced 

exposures of external debt holders to the company and the potential for GE Capital’s material 

financial distress to impact other firms and markets. Further, GE’s assumption and guarantee of 

substantially all of GE Capital’s long-term debt reduces the risk that GE Capital’s material 

financial distress could harm third-party financial market participants.

Deposit Liabilities

In connection with its final determination in 2013, the Council considered GE Capital’s 

relatively substantial use of brokered deposits at its U.S. insured depository institutions. As of 

December 31, 2012, GE Capital’s depository institutions had approximately $47 billion in 

deposits, comprising 10 percent of GE Capital’s total liabilities.56 Approximately $30 billion in 

deposits was held at U.S. insured depository institutions, of which 86 percent, or $26 billion,

consisted of brokered deposits,

57 a product that the Council at the time of the final determination 

concluded tended to be a less-stable source of funding than other types of deposits.

Since the Council’s final determination, GE Capital has divested both of its U.S. depository 

institutions and no longer funds itself with any U.S. deposits.58 GE Capital holds $9 billion in 

deposits in its non-U.S. bank subsidiaries, representing 4 percent of the company’s liabilities.59 

The cessation of the company’s use of brokered deposits and the significant decrease in reliance 

on deposits to fund its operations are significant changes since the Council’s final determination

and largely eliminate exposures arising from deposit liabilities as a source of potential risk to 

U.S. financial stability in the event of the company’s material financial distress.

Exposures of Large Financial Institutions to GE Capital

In 2013, the Council found that the on– and off–balance sheet exposures of other large financial 

institutions to GE Capital, including through CP, long-term debt, securitizations, derivatives, and 

lines of credit, could serve as a mechanism by which stress from GE Capital’s material financial 

distress could be transmitted to those firms and to financial markets more broadly.60 Since the 

Council’s final determination, aggregate on–balance sheet exposures of large financial 

 54 GE, Quarterly Report on Form 10-Q for the period ended March 31, 2016, p. 77. On April 15, 2016, $16.4 billion 

of GE Capital’s long-term debt matured. GE, Quarterly Report on Form 10-Q for the period ended March 31, 2016, 

p. 78.

55 Scheduled maturities include the annual maturities of GE Capital borrowings assumed by GE. GE, Annual Report 

on Form 10-K for the year ended Dec. 31, 2015, p. 166. 56 GE Rescission Request Summary, p. 6. 57 GE Capital, Form FR Y-9C for the period ended Dec. 31, 2012, p. 25. 58 GE Rescission Request Summary, p. 2.

59 As of 2015 Adjusted. GE Rescission Request Summary, p. 6. 60 Basis for Final Determination, p. 6.
June 28, 2016

15

institutions to GE Capital have significantly decreased, including CP held by G-SIBs, unsecured 

long-term debt issued to G-SIBs, and securitization debt held by G-SIBs.

61

As of December 31, 2012, GE Capital had $30 billion of securitization debt, representing 

approximately 5 percent of its total assets.

62 The Council found that while the non-recourse 

nature of these borrowings meant that holders of the asset-backed notes did not have recourse to 

GE Capital’s assets, in the event of a significant downgrade of GE Capital’s credit, the 

securitization entity could be downgraded and its asset values could decline, exposing 

noteholders to potential losses. Since the final determination, GE Capital has reduced its 

securitization activity by 90 percent, to approximately $3 billion.63 Due to the substantial 

reduction in securitization debt, GE Capital’s securitizations are significantly less likely to serve 

as a mechanism through which GE Capital’s material financial distress could be transmitted to 

other firms or markets.

At the time of the final determination, the Council also concluded that while GE Capital’s 

relatively small position and minimal activities in the over-the-counter derivatives markets posed

a relatively low risk of negatively affecting its counterparties, G-SIBs’ exposures to the company

through derivatives contributed to the potential for negative impacts on those institutions and the 

broader markets if GE Capital were to experience material financial distress. This potential for 

negative impacts has been mitigated to some extent by GE Capital’s increased use of central 

clearing of derivatives.

As of June 30, 2012, GE Capital maintained aggregate committed lines of credit of 

approximately $49 billion with 54 financial institutions.64 Since then, as of March 31, 2016, GE 

Capital has replaced its direct credit lines with those institutions with a single line of credit for 

approximately $42 billion with GE, which in turn has lines of credit with 44 financial 

institutions, and GE Capital may access GE’s lines of credit unconditionally.65 Thus, while large 

financial institutions no longer have any direct exposure to GE Capital through committed lines 

of credit, they are indirectly exposed to GE Capital as a result of GE Capital’s ability to draw on 

its direct line with GE. Accordingly, in the event of GE Capital’s material financial distress, GE 

Capital’s ability to use its line of credit with GE could still indirectly increase liquidity strains on 

the third-party lenders to GE.

In sum, the significant reductions in the on– and off–balance sheet exposures of G-SIBs to GE 

Capital substantially reduce the potential for GE Capital’s material financial distress to pose a 

threat to U.S. financial stability through the exposure transmission channel.

 61 GE Rescission Request Summary, p. 6. 62 GE Rescission Request Summary, p. 6. 63 GE Rescission Request Summary, p. 6. 64 GE Capital, Quarterly Report on Form 10-Q for the period ended June 30, 2012, p. 68. 65 GE, Quarterly Report on Form 10-Q for the period ended March 31, 2016, p. 40; GE Rescission Request 

Summary, p. 6.
June 28, 2016

16

Aggregate Exposures and the Risk of Contagion 

At the time of its final determination, the Council concluded that the aggregate exposures of 

large financial institutions to GE Capital could lead to contagion effects and serve as a 

mechanism by which material financial distress at GE Capital could be transmitted to financial 

markets more broadly.66 Further, the Council found that there could be uncertainty among 

market participants regarding the extent of potential losses that could arise from GE Capital’s 

indirect interconnections to other large financial institutions or the scale of potential disruptions 

in important funding and other markets. This type of uncertainty can lead market participants to 

pull back from a range of firms and markets in order to reduce exposures, thereby increasing the 

potential for destabilization.67

A number of recent developments at GE Capital substantially mitigate the risk that contagion 

could spread as a result of material financial distress at GE Capital. First, GE Capital’s 

decreased size and lesser importance to financial markets reduce the potential for the company’s 

material financial distress to cause or contribute to contagion. The company has exited a number 

of key markets in which it previously operated, making it less likely that its distress would lead 

to a reduction in the provision of credit or a withdrawal from financial markets by market

participants.

Second, the changes to GE Capital’s funding model, particularly its decrease in short-term 

funding, reduce the risk of contagion arising from the company’s material financial distress. In 

particular, GE Capital is not a significant issuer of CP, and no MMFs are holders of its CP, 

significantly mitigating this source of potential contagion.

Third, the potential for contagion is substantially reduced because G-SIBs’ direct exposures to 

GE Capital have significantly decreased, as described above. Moreover, financial institutions’

indirect exposures to GE Capital, such as exposures arising from GE Capital’s securitization

activity, have markedly declined.68 The reduction in financial market participants’ aggregate 

direct and indirect exposures to GE Capital reduces the risk that the company’s material financial 

distress would lead to contagion.

Finally, GE’s assumption and guarantee of a substantial portion of GE Capital’s borrowings have 

substantially mitigated the risk of GE Capital’s material financial distress impacting the U.S. 

financial system. The negative effects of these exposures to GE Capital would now be 

transmitted to the broader financial system only to the extent that market participants are 

concerned that GE may be unable to satisfy these obligations in the event of GE Capital’s 

material financial distress. While the assumption and guarantee do not eliminate counterparties’ 

exposures to GE Capital, this development mitigates the risks posed by GE Capital’s material 

financial distress to other firms and markets, and thereby reduces the risk of contagion.

 66 Basis for Final Determination, p. 6. 67 Basis for Final Determination, p. 7. 68 Basis for Final Determination, p. 6.
June 28, 2016

17

3.1.2 Asset Liquidation Transmission Channel

At the time of the final determination, the Council concluded that if GE Capital were to 

experience material financial distress and could no longer access wholesale funding markets, the 

company could be forced to sell assets quickly to fund its operations and meet its obligations.69

Since the final determination, the size and composition of GE Capital’s balance sheet have 

significantly changed. Total assets have fallen by over 50 percent, the mix of the company’s 

assets is far less similar to that of other large financial firms, and the company has significantly 

reduced its reliance on short-term funding. These significant changes to the company’s funding 

model and asset holdings, described below, have substantially reduced the potential for material 

financial distress at GE Capital to impair financial intermediation or financial market functioning 

through the asset liquidation transmission channel.

Reliance on Short-Term Wholesale Funding

At the time of its final determination in 2013, the Council concluded that GE Capital’s funding 

sources were volatile and could dry up quickly if the firm experienced material financial distress 

during a period of financial market stress, thus requiring the company to liquidate a significant 

amount of assets in order to meet its obligations.

70

Since year-end 2012, GE Capital has dramatically altered its funding structure and reduced its 

reliance on short-term funding.71 GE Capital’s short-term funding has fallen from 18 percent to 

5 percent of the company’s total assets, dropping to $14 billion.

72 The decrease in short-term 

funding was driven largely by an 88 percent reduction in the company’s outstanding CP and an 

80 percent drop in the company’s total deposits, which included a substantial amount of brokered 

deposits at the time of the final determination. This diminished reliance on short-term liabilities 

sharply reduces the potential for the company, in the event of its material financial distress, to be 

forced to liquidate assets as a result of an inability to roll over existing debt or due to significant 

deposit withdrawals.

Asset Composition

At the time of the Council’s final determination, the Council considered the company’s asset 

composition in assessing the potential effects of a forced liquidation of GE Capital’s assets on 

other market participants.

GE Capital held approximately $60 billion in investment securities as of March 31, 2016, a small 

increase from $54 billion at year-end 2012.

73 While GE Capital has slightly reduced its holdings 

of potentially less-liquid securities, such as U.S. corporate bonds, commercial mortgage-backed 

 69 Basis for Final Determination, p. 8. 70 Basis for Final Determination, p. 8. 71 GE Rescission Request Summary, p. 6. 72 As of 2015 Adjusted. GE Rescission Request Summary, p. 6. 73 GE Capital, Form FR Y-9C for the period ended March 31, 2016, p. 17; GE Capital, Form FR Y-9C for the period 

ended Dec. 31, 2012, p. 13.
June 28, 2016

18

securities (CMBS), and asset-backed securities (ABS),

74 the size of its investment portfolio has 

not materially changed because it has increased its holdings of U.S. Treasury and agency 

securities.75 Since year-end 2012, GE Capital’s holdings of CMBS and ABS have marginally 

declined, from $9 billion to $8 billion as of March 31, 2016.

76 The company’s holdings of other 

domestic debt securities, including U.S. corporate bonds, also declined slightly, from $24 billion 

as of year-end 2012 to $23 billion as of March 31, 2016.

77

However, the potential for a rapid liquidation of assets by GE Capital to impact market 

functioning has decreased since 2012, because GE Capital’s holdings relative to the size of these 

markets, as measured by both total outstanding amount and average daily trading volume, have 

declined.

78 Moreover, most of the company’s U.S. corporate bonds and CMBS portfolios are 

held in its run-off insurance business and are not available to address non-insurance liquidity 

needs.79

Since the Council’s final determination, GE Capital has also decreased its holdings of financing 

receivables, which were some of its least-liquid assets, by 74 percent, from $277 billion in 2012 

to $72 billion.

80 GE Capital now focuses on the healthcare, energy, and aviation leasing 

markets, among others,81 in which other large financial institutions are generally less 

concentrated. Due to the size and relative illiquidity of GE Capital’s remaining portfolio of loans 

and leases, rapid liquidations of those assets could still produce negative market price impacts.

However, changes to GE Capital’s portfolio of financing receivables make it less likely that any 

such sales would directly impact the holdings of other large financial institutions.

In addition, at the time of its final determination in 2013, the Council noted that holdings of 

highly liquid assets can reduce the extent to which GE Capital would be forced to liquidate assets 

in the event of its material financial distress. As of year-end 2012, GE Capital held $57 billion 

highly liquid assets, representing 10 percent of total assets.82 The company has increased these

holdings to $77 billion, or 29 percent of total assets.83 This amount is in excess of the 

company’s short-term funding and the current portion of long-term debt. The significant amount 

of GE Capital’s available highly liquid assets as a proportion of total assets and short-term 

liabilities reduces the likelihood that the company would be forced to liquidate illiquid assets in 

 74 These are markets that have previously experienced liquidity issues during periods of overall market stress. 75 GE Capital, Form FR Y-9C for the period ended March 31, 2016, p. 16. 76 GE Capital, Form FR Y-9C for the period ended Dec. 31, 2012, pp. 12-13; GE Capital, Form FR Y-9C for the 

period ended March 31, 2016, pp. 16, 17. 77 GE Capital, Form FR Y-9C for the period ended Dec. 31, 2012, p. 13; GE Capital, Form FR Y-9C for the period 

ended March 31, 2016, p. 17. 78 Securities Industry and Financial Markets Association, Statistics, U.S. Bond Market Issuance and Outstanding, 

U.S. Mortgage-Related Issuance and Outstanding, U.S. ABS Issuance and Outstanding, U.S. Bond Market Trading 

Volume, U.S. SF Trading Volume, U.S. Bond Market Trading Volume, accessed June 10, 2016, available at 

http://www.sifma.org/research/statistics.aspx. 79 GE, Annual Report on Form 10-K for the period ended Dec. 31, 2015, p. 163. 80 As of 2015 Adjusted. GE Rescission Request Summary, p. 6. 81 See GE Rescission Request Summary, p. 2. 82 “Highly liquid assets” includes GE Capital’s cash and balances due from depository institutions, federal funds 

sold, securities purchased under agreements to resell, and U.S. Treasury and agency securities.

83 As of 2015 Adjusted. GE Rescission Request Summary, p. 6.
June 28, 2016

19

the event of its material financial distress, and therefore mitigates the potential impact of the 

company’s distress on other firms and markets. 

At the same time, in the context of the company’s material financial distress, the company may 

be in imminent danger of insolvency or defaulting on its financial obligations.

84 In such a 

scenario, the company’s highly liquid assets may be insufficient to satisfy the company’s

obligations. If GE Capital no longer held a sufficient supply of highly liquid assets to satisfy its 

obligations, the company could access its $42 billion credit line with GE, which, in turn, may 

access its committed credit lines with third-party financial institutions.

85 This additional source 

of funding is well in excess of GE Capital’s amount of short-term funding, but is less than the 

sum of its short-term funding and current portion of long-term debt. GE Capital’s ability to 

access this line of credit does not eliminate the potential for an asset liquidation by the company 

in the event of its material financial distress, but it reduces the likelihood of such a liquidation 

and therefore significantly reduces the potential for GE Capital to create a fire-sale dynamic in 

financial markets.86

3.1.3 Critical Function or Service Transmission Channel

In making a final determination with respect to GE Capital, the Council considered whether, if 

GE Capital were to experience material financial distress, it may no longer be able or willing to 

provide a critical function or service that is relied upon by market participants or customers and 

for which there were no ready substitutes.87 The Council analyzed GE Capital’s role as one of 

the largest lenders in the areas of middle market commercial lending and leasing, consumer 

revolving credit, and aviation financing.

88 The Council concluded that material financial distress 

at GE Capital that limited its ability to continue to provide credit in these markets, particularly 

during a period of overall stress in the financial services industry or in a weak economic 

environment, could have an adverse effect on borrowers in those markets.89

Since 2012, GE Capital has exited U.S. consumer lending through its divestiture of Synchrony, 

substantially reduced its middle-market lending activities, and is now focused on three 

businesses that support GE’s industrial business: aviation, energy, and industrial financing.90 

Although GE Capital remains one of the leading providers of aviation leasing,

91 potential risks to 

U.S. financial stability arising from the critical function or service transmission channel have 

substantially declined.

 84 See 12 C.F.R. part 1310, app. A, II.b. 85 GE, Quarterly Report on Form 10-Q for the period ended March 31, 2016, p. 40. 86 However, if GE Capital accessed its line of credit with GE and GE in turn borrowed under its lines of credit with 

third-party financial institutions, GE Capital’s distress could be transmitted to those third parties through the 

exposure transmission channel, as described above. 87 Basis for Final Determination, pp. 8-9. 88 Basis for Final Determination, pp. 8-9.

89 Basis for Final Determination, pp. 8-9.

90 GE Rescission Request Summary, pp. 2, 6.

91 See, e.g., GE, Press Release, GE Capital Aviation Services Delivers Leased Boeing 737-800 to New Customer 

NewGen Airways (May 3, 2016) available at http://www.genewsroom.com/press-releases/ge-capital-aviationservices-delivers-leased-boeing-737-800-new-customer-newgen. 
June 28, 2016

20 

3.2 Existing Supervision and Regulation

In the annual reevaluation of its final determination regarding GE Capital, the Council 

considered the degree to which GE Capital is already regulated by one or more primary financial 

regulatory agencies.92 Staff of Council members and member agencies consulted with

representatives from the GE Capital supervisory staff from the Board of Governors, with staff of 

the Board of Governors and FDIC with respect to the second resolution plan submitted by GE 

Capital in December 2015, and with representatives of the supervisory staff of the U.K. PRA 

regarding their supervision of GE Capital’s non-U.S. businesses. 

Over the last year, GE Capital has divested the entirety of its U.S. banking operations and no 

longer owns or controls any U.S. insured depository institutions.93 In November 2015, GE 

divested GE and GE Capital’s stake in Synchrony, and in December 2015, the Board of 

Governors de-registered GE Capital as an SLHC.

94 As of April 2016, GE Capital had sold or 

transferred all of the loan and lease assets and all of the deposits of its subsidiary GE Capital 

Bank, an FDIC-insured Utah industrial loan company.

95 As of December 2015, GE Capital is no 

longer an SEC registrant and does not report under the Securities Exchange Act of 1934.96

GE Capital was subject to consolidated supervision by the Board of Governors as a result of the 

Council’s final determination regarding the company. On July 20, 2015, the Board of Governors 

issued a final order establishing enhanced prudential standards for GE Capital pursuant to section 

165(b) of the Dodd-Frank Act.97 Following the Council’s rescission of its final determination 

regarding the company, GE Capital is no longer subject to supervision by the Board of 

Governors. Further, because GE Capital is no longer a registered SLHC, the company is no 

longer subject to consolidated supervision in the United States. GE Capital’s U.S. insurance 

operations continue to be regulated and supervised by the Kansas Insurance Department. 

Over the past year, GE Capital has also reduced the scope of its foreign banking operations.98 

GE Capital conducts foreign banking operations in Europe under the authority of national 

supervisors and the European Central Bank. GE Capital has reorganized its foreign operations 

through the establishment of a holding company for its non-U.S. assets and operations.99 The 

non-U.S. holding company is subject to consolidated supervision by the U.K. PRA and, as such, 

is subject to consolidated capital and liquidity requirements under EU and U.K. Basel III rules. 

The company’s non-U.S. entities are subject to the consolidated supervision of the U.K. PRA as 

 

92 See Dodd-Frank Act section 113(a)(2)(H), 12 U.S.C. § 5323(a)(2)(H). 

93 GE Rescission Request Summary, p. 2.

94 GE, Press Release, Synchrony Financial Announces Completion of Separation from GE (Nov. 17, 2015) available 

at http://www.businesswire.com/news/home/20151117006159/en/Synchrony-Financial-Announces-CompletionSeparation-GE; Federal Reserve Release, Actions of the Board, Its Staff, and the Federal Reserve Banks; 

Applications and Reports Received (Dec. 2, 2015), p. 6, available at 

http://www federalreserve.gov/Releases/H2/20151205/h2.pdf. 95 See GE Rescission Request Summary, p. 6. 96 GE, Current Report on Form 8-K (Dec. 2, 2015), p. 4. 97 Final Order Applying Enhanced Prudential Standards And Reporting Requirements To General Electric Capital 

Corporation, 80 Fed. Reg. 44,111 (July 24, 2015). 

98 See GE Rescission Request Summary, p. 5. 99 GE Rescission Request Summary, p. 2.
June 28, 2016

21

long as it maintains U.K. banking assets or the consolidated supervision of a EU host country for 

as long as the company retains credit institutions in the EU.100 If GE Capital completes the sale 

of all of its European banking assets, GE Capital’s non-U.S. operations would no longer be 

subject to consolidated prudential supervision.

3.3 Resolvability

In making a final determination with respect to GE Capital, the Council considered whether the 

threat GE Capital could pose to U.S. financial stability could be mitigated or aggravated by its 

complexity, the opacity of its operations, or the difficulty of resolving the company. The 

Council found that GE Capital’s interstate and cross-border complexities and the lack of a global 

resolution framework aggravated the risk that material financial distress at GE Capital could 

pose a threat to financial stability.101 The Council also observed that a number of other factors 

could further complicate a resolution, including GE Capital’s intercompany funding and shared 

service arrangements.102 The Council concluded that GE Capital’s complexity could aggravate

the risk that its material financial distress could pose a threat to U.S. financial stability and 

significantly decreased the likelihood of preserving its franchise value in a recovery or resolution 

scenario.

103

GE Capital has fundamentally changed its business and taken steps to become a simpler 

organization since the Council’s final determination. As noted above, GE Capital has become a 

much less significant participant in the financial markets and the economy through a series of 

divestitures and a transformation of its funding model. The company has also reorganized its 

legal structure, reducing the number of its legal entities, among other developments.

104 In 

addition, except with respect to intercompany services and certain intercompany debt, the 

company has largely separated its U.S. and non-U.S. assets and operations from each other,

which reduces the potential for transmission of distress between GE Capital’s U.S. and non-U.S.

businesses.

105 

GE Capital remains a complex financial company with entities operating in many countries, and 

could pose potential challenges to a rapid and orderly resolution in bankruptcy. However, the

changes at GE Capital since the Council’s final determination in 2013 have significantly reduced 

the potential for the negative effects of material financial distress at GE Capital, including any 

effects resulting from potential resolvability challenges or the company’s complexity, to be 

transmitted through each of the three transmission channels described above and thereby to pose 

a threat to U.S. financial stability.

 100 See Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013, Chapter 3, Section I, 

Article III, p. L176/396, available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:176:0338:0436:EN:PDF. 101 Basis for Final Determination, pp. 10-11. 102 Basis for Final Determination, pp. 10-11. 103 Basis for Final Determination, pp. 10-11. 104 GE Capital Rescission Request Summary, p. 2. 105 See GE, Quarterly Report on Form 10-Q for the period ended March 31, 2016, p. 78. 
June 28, 2016

22

4. CONCLUSION

The Council has determined that GE Capital no longer meets the standards for a determination 

under section 113 of the Dodd-Frank Act and has rescinded its final determination that material 

financial distress at GE Capital could pose a threat to U.S. financial stability and that GE Capital 

shall be supervised by the Board of Governors and be subject to enhanced prudential standards.
June 28, 2016

23

APPENDIX: SELECT GE CAPITAL FINANCIAL METRICS

($ Billions)

Dec. 31, 

2012

2015 

Adjusted

% 

Change

Assets

Total Assets $549 $265 (52)%

Highly Liquid Assets 57 77 35%

 Highly Liquid Assets as a % of Total Assets 10% 29%

Loans and Lease Financing Receivables 277 72 (74)%

Loans to Consumers 72 4 (95)%

 U.S. Loans to Consumers 50 – (100)%

Loans Secured by Real Estate 72 17 (77)%

 U.S. Loans Secured by Real Estate 23 5 (76)%

Commercial & Industrial (C&I) Loans 101 35 (66)%

 U.S. C&I Loans 57 12 (78)%

Commercial Real Estate Equity 22 – (100)%

Other Assets 165 71 (57)%

Liabilities

Total Liabilities 466 227 (51)%

Commercial Paper Outstanding 43 5 (88)%

Deposits 47 9 (80)%

 U.S. Deposits 30 – (100)%

Short-Term Funding 98 14 (86)%

 Short-Term Funding as a % of Total Liabilities 21% 6%

Securitization Debt 30 3 (90)%

Long-Term Debt 225 113 (50)%

Source: GE Rescission Request Summary, p. 6.