MetLife’s designation as a systemically important financial institution, or SIFI, by the Financial Stability Oversight Council was overturned Wednesday by a federal judge in a ruling that critics say deals a significant blow to federal attempts to regulate large nonbank financial companies.
Judge Rosemary Collyer of the U.S. District Court for the District of Columbia issued a sealed decision Wednesday agreeing with MetLife that the FSOC “erred” in designating the company a nonbank systemically important financial institution.
Dennis Kelleher, president and CEO of Better Markets, called the court’s ruling “a dangerous development that threatens the entire structure that protects the country and its taxpayers from future financial crashes caused by nonbanks in the so-called shadow banking system.”
Steven Kandarian, MetLife’s chairman, president and CEO, said in a statement that the ruling “validates MetLife’s decision to seek judicial review of our SIFI designation. From the beginning, MetLife has said that its business model does not pose a threat to the financial stability of the United States. This decision is a win for MetLife’s customers, employees and shareholders.”
The Treasury Department issued a statement stating it is confident that “FSOC’s determination was lawful and will continue to defend the Council’s designations process vigorously.”
FSOC, the Treasury said, “conducted a rigorous analysis of MetLife, including extensive engagement with the company, and determined that material financial distress at MetLife could pose such a threat to the financial system. We firmly believe that FSOC acted well within its legal authority to protect the entire global economy.”
Analysts at Washington Analysis issued a statement saying they expect FSOC to appeal the decision to the U.S. Court of Appeals for the D.C. Circuit. Judge Collyer said both parties — MetLife and FSOC — must meet by April 6 to determine whether all or some of Wednesday’s decision will be made public.
Washington Analysis expects the government will request that “aspects of the decision be kept confidential, so as to protect what they view to be proprietary aspects of the designation process.”
The analysts also expect the government will appeal the decision “as there are clear implications for the ability of federal regulators to continue overseeing large nonbank financial companies if today’s decision holds.”