Federal Reserve Chair Janet Yellen said freeing American International Group Inc. from the tight scrutiny tied to its too-big-to-fail label is an example of the process working properly — proving that a systemically important financial institution can make itself less risky.

“AIG has largely sold off or wound down its capital markets businesses, and has become a smaller firm that poses less of a threat,” Yellen said in a statement on her pivotal vote in the Financial Stability Oversight Council’s 6-3 decision last week. “The possibility of de-designation provides an incentive for designated firms to significantly reduce their systemic footprint.”

Other regulators on the panel led by Treasury Secretary Steven Mnuchin also issued statements Monday that accompanied a document explaining the group’s decision. The paper explains how AIG’s turn from its crisis-era portfolios and its generally smaller scale helped make the case that it should be let out of the cage built by the 2010 Dodd-Frank Act and Obama-era regulators.

The council voted Friday to remove AIG’s label as a so-called SIFI. That leaves only Prudential Financial Inc. as the sole SIFI still under heightened scrutiny, which means it faces tougher rules and oversight administered by the Federal Reserve.

Competitive Environment

“I am concerned that by picking institutions from among similarly situated competitors within the same industry and labeling one systemically important and not the other, we may adversely affect the competitive environment in unfair and arbitrary ways,” said Acting Comptroller of the Currency Keith Noreika. He added that the FSOC is “getting out of that line of business starting today.”Last week’s 6-3 vote represented the minimum needed and was dependent on the council’s shift toward the appointees of President Donald Trump. The council normally needs seven votes — including the Treasury secretary — for a designation change, but because Securities and Exchange Commission Chairman Jay Clayton sat it out to avoid a conflict of interest, the group reached its two-thirds majority with six members. The three opposing the move were the heads of the Federal Deposit Insurance Corp., Federal Housing Finance Agency and Consumer Financial Protection Bureau.

“AIG remains a large, complex, highly interconnected global organization,” FDIC Chairman Martin Gruenberg said in his statement. CFPB Director Richard Cordray said AIG’s meltdown represented “a defining moment of the financial crisis.”

“AIG did become smaller as a result of those tragic events, not because it did so on a planned or conscious basis, but simply because its business model blew up,” Cordray said.