A complaint will be filed today in Washington to oppose the U.S. Financial Stability Oversight Council’s decision, MetLife said in a statement. The largest U.S. life insurer called its designation premature, and said it has offered “substantial and compelling evidence” it isn’t a systemic risk.
MetLife “has operated under a stringent state regulatory system for decades,” Kandarian said in the statement. “Adding a new federal standard for just the largest life insurers and retaining a different standard for everyone else will drive up the cost of financial protection for consumers without making the financial system any safer.”
The insurer is mounting the strongest opposition yet to a provision of the 2010 Dodd-Frank law, which was passed to prevent future financial crises. It was the fourth firm to be deemed a non-bank systemically important financial institution, or SIFI, by the FSOC, which is led by Treasury Secretary Jacob J. Lew.
MetLife has said it doesn’t deserve the systemic-risk label because its failure wouldn’t threaten the financial system. The SIFI tag subjects companies to stricter Federal Reserve oversight that could include tougher capital, leverage and liquidity requirements. Final rules haven’t yet been written.
“It’s not wise to begin your new relationship with a federal regulator by suing them,” Isaac Boltansky, an analyst at Compass Point Research & Trading LLC, said by phone before MetLife announced the suit. “I don’t think it’s in their best interest.”
U.S. lawmakers voted in December to give the Fed more flexibility in how it tailors the rules after insurers said they shouldn’t be subject to standards designed for banks. That change reduced the need for MetLife to sue, Boltansky said. By mounting the legal challenge, the insurer may be limiting its ability to influence how the rules are written, he said.
Gloria Vogel, an analyst at Drexel Hamilton LLC, said a SIFI designation could cut MetLife’s return on equity, and limit buybacks, dividends and acquisitions. The insurer’s stock price already reflects those expectations, she said.