Insurer AIG, rescued by the US government at the peak of the 2008 financial crisis, will no longer face the stricter oversight of a "too big to fail" institution, the Treasury Department said Friday.

Regulators with the Financial Stability Oversight Council voted 6-3 to relieve AIG of the designation that its failure could "pose a threat to US financial stability," the department said.

The move greatly eases the regulatory oversight of AIG, which was rescued in a government bailout at the height of the crisis because of its close links with other key financial institutions.

The government saved AIG with a controversial $182 billion bailout that was later repaid in full by the insurer.

It was one of the most momentous decisions taken at the height of the crisis. 

Once the world's largest insurer, AIG was teetering on the verge of collapse under tens of billions of dollars of souring, unhedged derivatives contracts in September 2008 when it sought liquidity from the New York Fed.

On the same climactic weekend that they let investment banking giant Lehmann Brothers fail, the government agreed to lend AIG an initial $85 billion in exchange for a 79.9 percent controlling stake.

AIG was saved as the global financial system stood at the brink of disaster.

If AIG had failed, former Treasury Secretary Henry Paulson said in 2015 in a trial over whether the bailout was even legal, "it would have taken down the financial system and hurt millions of Americans." 

AIG recovered its leading role in the US industrial and property insurance market after it unloaded key international units. The US Treasury sold its final shares in December 2012.

"The Council has worked diligently to thoroughly reevaluate whether AIG poses a risk to financial stability," Treasury Secretary Steven Mnuchin said Friday.

"This action demonstrates our commitment to act decisively to remove any designation if a company does not pose a threat to financial stability."

Mnuchin was joined in the majority by other regulators including Federal Reserve Chair Janet Yellen.

Those voting against included Richard Cordray, director of the Consumer Financial Protection Bureau.

AIG applauded the vote.

"The Council's decision reflects the substantial and successful de-risking that AIG's employees have achieved since 2008," said chief executive Brian Duperreault. 

"The company is committed to continued vigilant risk management and to working closely with our numerous regulators to enable a strong AIG to continue to serve our clients." 

Shares in AIG rose 1.0 percent in after-hours trade to $62.