The Financial Stability Oversight Council today advanced MetLife to the last stage before designation as a non-bank systemically important financial institution (SIFI) this afternoon.
MetLife said it would it would challenge such a designation.
“I do not believe that MetLife is a systemically important financial institution,” said Steve Kandarian, MetLife chairman, president and CEO, in confirming this evening that it was the company that had been advanced to the so-called Stage III for SIFI designation,.
“The Dodd-Frank Act defines a SIFI as a company whose failure ‘could pose a threat to the financial stability of the United States,’” Kandarian said. “Not only does exposure to MetLife not threaten the financial system, but I cannot think of a single firm that would be threatened by its exposure to MetLife.”
If designated, MetLife would be the fourth to succumb to the label. American International Group and GE Capital accepted such a designation earlier this month while Prudential Financial has confirmed that it has appealed such a designation.
The FSOC has already said it will provide Pru a confidential hearing on its appeal some time this month.
Many industry observers had anticipated that MetLife would progress to a Stage III when it shed its bank earlier this year because it meets the initial broad criteria for designation.
The FSOC, in deeming AIG a SIFI earlier this month, noted the company’s sizable life and annuity portfolio and their product features as making the company vulnerable to a possible run on the company. The FSOC did so even though life and annuity portfolios are intended to be long-term liabilities, and despite the fact there are tax implications and surrender charges for policyholders.
This thinking would also envelope MetLife, analysts believe.
In his statement, Kandarian contended that the the life insurance industry is a source of financial stability. “Even during periods of financial stress, the long-term nature of our liabilities insulates us against bank-like ‘runs’ and the need to sell off assets,” he said.