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(Reuters) — Insurer MetLife said it is exploring ways to fight the U.S. government's proposal on Thursday to deem it “systemically important” and subject it to stronger regulatory oversight.
MetLife is the third insurer to be tapped for such a designation, which comes with heavy capital requirements and strict supervision by the Federal Reserve, comparable to that of the largest banks. The systemically important label is used to identify companies whose failure could pose a potential threat to financial markets.
Prudential Financial Inc. and AIG have already been deemed “systemic” by the Financial Stability Oversight Council, which is comprised of the country's top financial regulators and was formed after the recent credit crisis.
MetLife said it was not ruling out “any of the available remedies” under the 2010 Dodd-Frank law to contest the designation.
“MetLife has served as a source of financial strength and stability during times of economic distress, including the 2008 financial crisis,” its chief executive, Steven Kandarian, said.
The systemically important designations are part of an effort to rein in the largest and most risky firms after the credit crisis showed how the collapse of one such firm could roil global markets.
But the process of designating systemically important financial institutions, known as SIFIs, has sparked a fierce debate on Capitol Hill.
Lawmakers, particularly Republicans, have complained about regulatory overreach and a lack of transparency in how the oversight council reaches its decisions. They have also raised concerns that systemic insurers would be saddled with bank-centric capital rules.
The Dodd-Frank Wall Street reform act automatically identified banks with over $50 billion in assets on their books as “systemic,” but left it to the oversight council to determine whether some non-banks also deserved the tag.
MetLife has more ardently argued against the designation than the other insurers, saying that unlike banks, its business lines and risk-taking do not have the potential to destabilize the larger financial system.
The company has 30 days to request a hearing before FSOC, to explain why it disagrees with the proposal. The council must schedule the hearing within 30 days and then has 60 days to make a final decision. Eventually, MetLife could challenge a final designation in court.
Scott Garrett, a Republican member of the House of Representatives, criticized Thursday's decision as “irresponsible and inappropriate.”
“The FSOC makes politically motivated decisions to expand the Fed's power with little-to-no real-world analysis,” Garrett said in an emailed statement.
The Fed itself has acknowledged it cannot tailor capital requirements for insurers without a legal fix to the Dodd-Frank act, and would have to treat them the same as banks.
The fix of the so-called Collins amendment has passed the Senate, but is stuck in the House.
Shares of MetLife have gained about 2.8% this year, after surging 64% in 2013 as the company scales back capital-intensive businesses to focus more on traditional life insurance and pension products.
(Reuters) — The U.S. risk council is looking to determine whether Warren Buffett's Berkshire Hathaway Inc. could be systemically important, a tag that would subject it to stricter regulatory oversight, Bloomberg reported, citing two people familiar with the matter.