Fed releases Ally Bank from capital, liquidity restrictions
Ally Financial has hit a key milestone in its eight-year-long recovery from the financial crisis.
The Detroit-based firm said Tuesday that the Federal Reserve released its Ally Bank unit from various commitments it made with respect to capital, liquidity and its business plan. The commitments were made as part of the bank’s application to become a Fed-regulated institution, which was approved last year.
The regulatory shackles were the residue of restrictions that were placed on Ally in the wake of government bailouts the auto lender received in 2008 and 2009, according to a source familiar with the situation. An Ally spokeswoman did not provide answers to questions prior to deadline.
One commitment that Ally Bank made to the Fed, and has now been lifted, was a promise to maintain a Tier 1 leverage ratio of at least 15%. The company did not disclose other specific commitments that were removed, but said that its bank may now manage its capital and liquidity subject to applicable regulatory requirements.
“This development completes the process of normalizing our regulatory framework, allowing us to optimize our capital and funding structure on a level playing field with other banks, and is a critical step in ensuring we remain on track for delivering on our financial and strategic objectives,” CEO Jeffrey Brown said.
The government rescue of Ally, formerly known as GMAC, came at a time when the company was on the brink of failure. But even after the U.S. Treasury Department sold its last common shares in Ally, the firm was forced to operate with less flexibility than many of its competitors.
Those restrictions have been gradually relaxed.
In 2015, Ally announced that its regulators were allowing the company to move more of its car-lending business into Ally Bank, which allowed the company to fund a larger percentage of its loans with relatively low-cost deposits.
Later that year, the Fed gave Ally permission to complete the redemption of preferred shares that were created as part of the bailout, which paved the way for the company to start paying a common stock dividend and repurchasing shares.