MetLife Inc.’s designation by the Financial Stability Oversight Council as a non-bank systemically important financial institution was overturned for two reasons that could impact other designations, court documents released Thursday show.
On March 30, U.S. District Court for the District of Columbia Judge Rosemary Collyer ordered MetLife’s December 2014 SIFI designation to be rescinded.
In the order unsealed Thursday, Ms. Collyer said her decision was based on FSOC officials departing from their own standards, without explanation, set for the SIFI designation process, and for failing to consider the costs to MetLife of being designated.
Departing from the process “alone renders FSOC’s determination process fatally flawed,” wrote Ms. Collyer, who found that FSOC “purposefully omitted any consideration of the cost of designation to MetLife. Thus, FSOC assumed the upside benefits of designation … but not the downside costs of its decision. That is arbitrary and capricious under the latest Supreme Court precedent,” she wrote.
Treasury Secretary Jacob Lew said in a statement that he strongly disagreed with the ruling, which he said “leaves one of the largest and most highly interconnected financial companies in the world subject to even less oversight than before the financial crisis.”
Mr. Lew said the heads of all U.S. financial regulators concurred in the designation, and by overturning it, “the court imposed new requirements that Congress never enacted, and contradicted key policy lessons from the financial crisis.” He noted that Congress chose not to require FSOC to conduct a formal cost-benefit analysis of designations.
“We intend to continue defending vigorously the process and the integrity of FSOC’s work, and I am confident that we will prevail,” Mr. Lew said.
A Treasury Department spokesman said the government will appeal the district court’s decision.