MetLife Inc.’s designation by the Financial Stability Oversight Council as a non-bank systemically important financial institution was overturned Wednesday by the U.S. District Court for the District of Columbia.
The order to rescind the designation was sealed, with parties scheduled to meet April 6 to discuss lifting the seal. In the order, U.S. District Judge Rosemary Collyer said the decision is final and appealable.
MetLife was designated a SIFI in December 2014 and appealed the decision in court. Steven A. Kandarian, MetLife chairman, president and CEO, said in a statement the ruling validates the company’s decision to seek judicial review. “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,” he said.
A Treasury spokesman said in an e-mailed statement that department officials “strongly disagree” with the court’s decision and will continue to defend the designations process. “FSOC 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.”
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said in a statement that he was encouraged by the ruling, “because today’s SIFI designations are just tomorrow’s taxpayer-funded bailouts.”
But Dennis Kelleher, president and CEO of Better Markets, a non-partisan, non-profit organization in Washington, said the decision could make bailouts more likely. “This decision has the momentous potential to establish two unequal standards where systemically significant banks are highly regulated, but systemically significant non-banks are unregulated. This will incentivize systemic risks to migrate to non-banks and enable systemic threats to grow unseen until they explode, threaten the financial system and economy, and require taxpayer bailouts,” Mr. Kelleher said in a statement.