Goldman Sachs will buy GE Capital Bank and assume $16 billion in deposits from the bank, the Wall Street giant announced Thursday.
The move comes as GE has been trying to slim down its finance arm in an effort to shed its designation as a potential threat to the financial system and the regulatory scrutiny that comes with that label. The deal means that the lending business that was previously conducted by GE Capital will now be run by one of the biggest Wall Street banks.
With the deal, Goldman Sachs will acquire GE Capital Bank’s online deposit platform and offer employment to “substantially all” of the employees currently working at GE Capital Bank.
“We look forward to welcoming and serving GECB’s online deposit customers at GS Bank with the high standard of service they have come to expect. We also look forward to working with our new colleagues from GECB,” Goldman Sachs Bank CEO Esta Stecher said in a statement.
News of the sale comes just days after Capital One Financial Corp., another bank holding company, announced that it would buy GE’s healthcare financing business for $9 billion.
GE announced in June that it would effectively break up its finance arm in order to avoid the added scrutiny that comes with being one of the non-bank firms that regulators oversee as if it were a mega bank.
GE Capital was named a “systemically important financial institution” in 2013 by the Financial Stability Oversight Council, the super-group of regulators created to identify potential financial instabilities beyond the banking system.
The decision to slim down the business will be a test case for whether that designation can be reversed.
In July, the Federal Reserve, the agency tasked with oversight of the non-bank systemic institutions, set out plans for regulating GE Capital that will allow for it to escape the tougher rules if it is successful in shrinking and convincing the council that it no longer is capable of taking down the financial system in a failure.
