Kirsten Hastings
The US Treasury has confirmed that it will appeal a federal court judgment that insurer MetLife is not a systemically important financial institutions (Sifi) and therefore should not face tougher regulatory oversight.
In the ruling, the judge presiding over the case criticised the Treasury’s Financial Stability Oversight Council (FSOC) for failing to consider the cost of labelling MetLife as ‘too big to fail’.
Companies classified as Sifi are deemed to be a threat to financial stability and are therefore subject to tighter regulatory controls and higher capital requirements.
Costs ignored
The final decision “hardly adhered to any standard when it came to assessing MetLife’s threat to US financial stability”, judge Rosemary Collyer said.
Adding that the regulators had “focused exclusively on the presumed benefits of [MetLife’s] designation and ignored the attendant costs, which is itself unreasonable”.
At the time of judgment, Steven Kandarian, chairman, president and chief executive of MetLife, said: “From the beginning, MetLife has said that its business model does not pose a threat to the financial stability of the United States.”
Less oversight
However, Treasury secretary Jack Lew criticised the ruling: “This decision leaves one of the largest and most highly interconnected financial companies in the world subject to even less oversight than before the financial crisis.
“After a thorough review, FSOC determined that material financial distress at the company could threaten US financial stability—the threshold for heightened supervision under Wall Street Reform. The heads of every US financial regulatory agency concurred in this judgment.
“In overturning the conclusions of experienced financial regulators, the court imposed new requirements that Congress never enacted, and contradicted key policy lessons from the financial crisis,” Lew said.
This article was originally published by International Adviser