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U.S. asks judge to throw out MetLife ‘Too Big to Fail’ suit

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(Bloomberg) — MetLife Inc.’s lawsuit challenging its designation by regulators as critical to the economy should be thrown out, U.S. Justice Department lawyers said without making public their arguments to the judge.

MetLife on January 13 became the first nonbank to challenge a decision by a panel of regulators, led by the Treasury secretary, that it is a systemically important financial institution, or SIFI, subject to stricter oversight. The phrase more commonly used to describe such institutions is “too big to fail.”

The insurer argued that it’s already subject to comprehensive supervision on the state level and that enhanced federal oversight will raise the cost of financial protection for consumers.

In a federal court filing Friday in Washington, the Justice Department asked that the case be dismissed. The U.S. filed its supporting reasons for the request under seal.

MetLife was the fourth company other than banks to receive the SIFI label from the Financial Stability Oversight Council.

The label means that regulators think the company’s failure could pose risks to the financial system, though it doesn’t imply that the firms currently face difficulty.

In response to a request by the judge in the case, the Federal Reserve and the Federal DepositInsurance Corp. in March extended by six months, to Dec. 31, 2016, MetLife’s deadline to file a so-called living will which details how if would unwind itself in a bankruptcy.

Delay Request

U.S. District Judge Rosemary Collyer asked for the delay because she wants to rule on early motions for dismissal or summary judgment before MetLife has to spend time and money preparing the will, according to filings in the case.

MetLife lowered its 2016 return on equity forecast on Thursday, in part because of the lack of clarity over what a SIFI designation will mean for capital requirements.

“The regulatory environment remains uncertain,” Chief Executive Officer Steve Kandarian said on a call with investors. “We’ve not yet seen draft capital rules, and there is no clarity on when those rules will be issued.”

Being designated a SIFI had also limited buybacks and damped deals, according to Kandarian.

“We have been cautious on share repurchases because capital requirements remain unknown for nonbank systemically important financial institutions,” Kandarian said. “There are some things we would probably be less likely to pursue in that environment than if that environment didn’t exist.”

The three other nonbanks labeled systemically important are insurers American International Group Inc., Prudential Financial Inc., and General Electric Co.’s finance arm.

The case is MetLife Inc. v. FSOC, 15-cv-00045, U.S. District Court, District of Columbia (Washington).


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