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July 23, 2014 at 11:39 AM
MetLife could be designated a systemically important financial institutions (SIFI) as early as next week, Bloomberg News said today, even though the article did not name a source. It said the vote could come as early as the next meeting of the Financial Stability Oversight Council (FSOC) July 31.
John Nadel, an analyst at Sterne, Agee and Leach in New York, said he was not surprised and that institutional investors had been expecting it. “For some time, it has been just a question of when,” Nadel said.
Suzanne Elio, a Treasury spokesperson, declined to comment on the possible designation of MetLife, but did confirm that the FSOC will hold a meeting next Thursday, July 31 and that nonbank designations are on the agenda.
John Calagna, a MetLife spokesman, declined to comment.
If designated a SIFI, MetLife will be subjected to stricter capital, leverage and liquidity requirements as a result of supervision by the Federal Reserve Board as well as state regulators. It would join American International Group and Prudential Financial as insurance SIFIs. General Electric Capital Corp. is the only other non-bank SIFI.
However, Janet Yellen, chairman of the Federal Reserve, has made clear in congressional testimony that insurance companies are different than banks, and that the Fed is in the process of creating metrics and adjusting its regulation to recognize the differences.
It could also demand stress testing for crisis scenarios, but stronger regulation of insurance SIFIs is unlikely to be unveiled until next year.
Steve Kandarian, MetLife chairman and CEO, acknowledged that in comments to MetLife institutional investors June 10. He said then that it was too early to know exactly what a systemic designation would mean for his company. Regulators “could still come up with draft rules that we would find reasonable or come up with draft rules that maybe we wouldn’t find as reasonable,” he said.
In designating MetLife at this time, the FSOC would be ignoring the House Financial Services Committee (FSC). The panel reported out two pieces of legislation that would establish at least a moratorium of up to one year on SIFI designations. The conservative leadership of the House FSC arguments that the FSOC SIFI designation process “is not transparent.”
