Regulators Designate MetLife for High-Risk Financial Oversight

WASHINGTON (Los Angeles Times/TNS) -

Federal regulators Friday designated MetLife Inc. for special oversight, saying the insurer is so big that its failure or other major problems would pose a threat to the U.S. financial system.

In a 9-1 vote, the Financial Stability Oversight Council — a panel of top regulators chaired by Treasury Secretary Jacob J. Lew — determined that MetLife was a systemically important financial institution.

The designation was created by the 2010 Dodd-Frank overhaul of financial regulations. Such firms are subject to tougher oversight by the Federal Reserve that could include requirements to hold more capital as a cushion against losses.

“After a year-and-a-half of extensive and in-depth analysis — including significant engagement with the company — the council has determined that material financial distress at MetLife could pose a threat to U.S. financial stability,” Lew said Friday.

“Consistent with its mandate, the council remains focused on protecting the broader economy from the types of risk that contributed to the financial crisis,” he said.

MetLife — the largest U.S. insurer, with about $585 billion in assets in 2013 — is the fourth non-bank financial firm to receive the designation.

The panel was created by Dodd-Frank to look for emerging risks in the hope of avoiding a repeat of the 2008 financial crisis.

The council also includes Fed Chairwoman Janet L. Yellen and the heads of the Securities and Exchange Commission, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau.

In 2012, the council designated Prudential Financial Inc., American International Group and General Electric Capital Corp. as systemically important financial institutions

MetLife strongly opposed the designation and said it would consider challenging it in court.

“We continue to believe that MetLife is not systemically important under the Dodd-Frank Act’s criteria, and the company has presented substantial and compelling evidence to FSOC to support this conclusion,” the company said in a statement Thursday night.

Singling out large life-insurance companies for the designation “will harm competition, lead to higher prices and less choice for consumers, and ultimately could result in less financial protection for middle-class families — who need it the most,” MetLife said.

The company, which has 30 days to seek judicial review of the decision, said it “will carefully review the designation rationale as it considers its next steps.”

MetLife did not receive any bailout assistance during the financial crisis. Neither did Prudential, the second-largest U.S. insurer by assets.

The U.S. committed $182 billion to bail out AIG, and the company used $125 billion of the money. Treasury sold its last shares in the company in 2013, ending with a $22.7 billion profit.

During the 2008 crisis, GE Capital, the financing arm for General Electric Corp., benefited from a special FDIC program that insured as much as $139 billion of the firm’s debt.