Federal regulators on Thursday took the first step toward declaring insurance company MetLife officially "too big to fail," setting it up to be regulated like a bank.
The Financial Stability Oversight Council, the super regulator created by the 2010 Dodd-Frank financial reform law to find threats to the financial system, notified MetLife that it intended to designate the company a systemically important financial institution Thursday, the company said. The decision means that MetLife would be regulated as a large bank, with tighter regulations, higher capital requirements and oversight from the Federal Reserve.
“MetLife strongly disagrees with the Financial Stability Oversight Council’s preliminary designation of MetLife as [systemically important institution], " said MetLife CEO Steven Kandarian.
“MetLife is not systemically important under the Dodd-Frank Act criteria. In fact, MetLife has served as a source of financial strength and stability during times of economic distress, including the 2008 financial crisis," Kandarian said.
Kandarian added that the company was not ruling out contesting the designation. It has 30 days to request a meeting with the council, after which it the council may make a final determination about the "systemically important" label.
Kandarian also warned that imposing bank-style capital requirements on MetLife would raise the cost of insurance for consumers.
MetLife, which the council has been reviewing for more than a year, is the third insurance company to be named too big to fail, after Prudential and AIG. AIG required a bailout in the 2008 financial crisis after its losses on derivatives deals threatened to bring down much of Wall Street. The council also has named General Electric Capital Corp. systemically important. Large banks are automatically given the designation.
Congressional Republicans have criticized the council for what they call a lack of transparency and thoroughness in the process of naming non-banks too big to fail.
Rep. Scott Garrett, R-N.J., said in response to MetLife being named a threat to the financial system that "today's irresponsible and inappropriate designation of another U.S. business as too-big-to-fail only strengthens my resolve to reform the out-of-control FSOC."
Garrett and other Republican members of the House Financial Services Committee had previously called on the council to postpone further designations until the process and its consequences were more clearly spelled out.