A federal judge has issued an order to remove the designation of nonbank systemically important financial institution (SIFI) from MetLife Insurance which was imposed by the federal government more than a year ago.
U.S. District Judge Rosemary M. Collyer in the U.S. District Court for the District of Columbia issued the order to remove the nonbank SIFI tag from MetLife. The global insurance provider was originally designated as a nonbank SIFI by the Financial Stability Oversight Council (FSOC) in December 2014 under the authority granted to the council by Dodd-Frank.
The court's removal of the SIFI tag from MetLife is a victory for opponents of the Dodd-Frank Act who claim that the controversial Wall Street reform legislation enables “Too Big to Fail.” The FSOC, like the Consumer Financial Protection Bureau, was created out of the Dodd-Frank Act. While supporters of Dodd-Frank claim that the legislation put an end to the taxpayer-funded bailouts for institutions deemed “Too Big to Fail,” its opponents claim that the law actually codifies “Too Big to Fail” by giving the FSOC the authority to designate certain institutions as “systemically important.”
According to reports, other nonbanks to receive the SIFI designation were American International Group (AIG), Prudential Financial, and General Electric. MetLife was the first institution to challenge the SIFI designation.
“Of all of the Council’s activities, none generates more controversy than its designation of non-bank financial institutions as ‘systemically important financial institutions,’ or SIFIs. Designation anoints institutions as Too Big to Fail, meaning today’s SIFI designations are tomorrow’s taxpayer-funded bailouts,” said Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, during a hearing in December [1].
MetLife has fought to have the SIFI designation removed since it was named such. The company sued the FSOC [2] in the U.S. District Court for the District of Columbia in January 2015 to have the designation removed because as a nonbank SIFI, MetLife was subject to heightened regulation which the company said increases compliance costs, which in turn increases costs to consumers without any added safety benefit for the financial system. The company even set up a portion of its website [3] devoted to providing a “central point for information related to the judicial review of FSOC's designation.”
In mid-May, the U.S. Department of Justice [4] made a non-public motion [5] to have MetLife's suit against the FSOC dismissed. MetLife filed a motion for summary judgment [6] with the U.S. District Court in the District of Columbia on June 16. Later in June [7], the National Association of Insurance Commissioners (NAIC), the American Council of Life Insurers (ACLI), the Academic Experts in Financial Regulation (AEFR), and the U.S. Chamber of Commerce all filed briefs backing MetLife’s attempt to have the SIFI tag removed.