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January 14, 2013 at 03:56 AM
MetLife has completed the sale of its bank to GE Capital, a transaction which removes it at least temporarily from oversight by federal regulators.
MetLife notified depositors at its bank that their deposits would be transferred last Friday, and Steven Kandarian, chairman, president and CEO disclosed the completion of the deal before the stock market opened this morning.
A total $6.4 billion in retail deposits were transferred.
“The closing of the transaction with GE Capital Retail Bank is an important step in the process of exiting retail banking and allows MetLife to maintain its strategic focus as a global insurance and employee benefits leader,” Kandarian stated.
The transaction was approved by the Office of the Comptroller of the Currency (OCC) on Dec. 12, 2012. MetLife “has begun to take the necessary administrative steps to deregister as a bank holding company,” Kandarian said.
The tone and substance of Kandarian’s remarks confirm that the bank is doing everything it can to escape federal regulation.
Some industry officials have even speculated that MetLife has threatened federal regulators with a legal challenge if they seek to designate MetLife as a systemically significant organization SIFI under the Dodd-Frank Act.
Analysts and Washington insiders believe that the Federal Stability Oversight Council (FSOC), which has the authority to do so, is eyeing MetLife, American International Group and Prudential Financial, as well as GE Capital, as the first non-banks to be designed as SIFIs.
That means it will be subject to consolidated regulation by the Federal Reserve Board.
Interestly, Moody’s Neil Strauss says that removal of the bank holding company structure would be credit negative because under Fed supervision, it says MetLife is more likely to retain earnings and capital and in a severe stress situation the Fed could provide MetLife with capital or liquidity support.
Strauss did say that “removal of the Fed regulatory jurisdiction does afford MetLife operations more business and financial flexibility, making it better able to compete with peers unburdened by the strictures of Fed supervision and thus more able to generate greater diversity of earnings and more interest from equity investors. But all told, losing the Fed umbrella weighs more heavily as a credit negative than the gains to MetLife from a credit perspective.”
Any reprieve for MetLife from Fed overview is likely to be only temporary as MetLife, in our view, remains a strong candidate to be designated a non-bank systemically important financial institution. Therefore, notwithstanding its plans to “de-bank,” MetLife would likely ultimately be subject to Fed regulation.
It was anticipated that the first non-bank SIFI would be designated in December, but the FSOC is apparently delaying action to get its legal ducks in a row after being told that certain institutions it was examining as potential SIFIs would file a legal challenge if so designated.
