http://www.nytimes.com/2015/04/11/business/dealbook/general-electric-to-sell-bulk-of-its-finance-unit.html?ref=todayspaper&_r=0
As banking has become less profitable and more riskier, G.E. has started selling of it's Capital division and will sell of most of the division in the next two years.
G.E. Capital has been one of the biggest lender with its hundreds of billions of dollars' worth of assets. G.E. began selling its finance unit by first selling $26.5 billion worth of real estate assets and has shrunk G.E. Capital from 42% to 28% of G.E.'s overall revenue since 2008. G.E. wants to focus on becoming the mightiest global industrial company.
This move by G.E. reflects how the biggest players in the financial industry face greater regulatory scrutiny and are incentivized to invest in traditional, conservative wealth management division.
G.E. wants to relieve itself from being considered as too-big-to-fail lender, a status that brings stricter regulatory requirements and downsizing is a big matter for G.E. as it does not want to be the next Lehman Brothers.
As banking has become less profitable and more riskier, G.E. has started selling of it's Capital division and will sell of most of the division in the next two years.
G.E. Capital has been one of the biggest lender with its hundreds of billions of dollars' worth of assets. G.E. began selling its finance unit by first selling $26.5 billion worth of real estate assets and has shrunk G.E. Capital from 42% to 28% of G.E.'s overall revenue since 2008. G.E. wants to focus on becoming the mightiest global industrial company.
This move by G.E. reflects how the biggest players in the financial industry face greater regulatory scrutiny and are incentivized to invest in traditional, conservative wealth management division.
G.E. wants to relieve itself from being considered as too-big-to-fail lender, a status that brings stricter regulatory requirements and downsizing is a big matter for G.E. as it does not want to be the next Lehman Brothers.
2 comments:
Erica, this is a very interesting article. This appears to be a very smart decision by GE. If they were to become a systematically important financial institution they would be burdened with regulatory bodies limiting their ability to make financial decisions. In addition, this will let them focus on the core business. Jim Collins frequently notes that many firms get away from their core concept and causes them to decline.
I agree with Austin about this being a good move. I wonder looking forward what this effect will have on other such too-big-to-fail banks/lenders in general, too. All in all, this is something worth following up on.
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