A federal judge has ruled against the US Treasury’s Financial Stability Oversight Council (FSOC) in a suit brought by MetLife, overturning the life insurer’s regulatory status as a systemically important financial institution (SIFI).
The reasons for the ruling were sealed by Washington, DC district court judge Rosemary Collyer.
MetLife’s share price on the New York Stock Exchange closed at $44.68 (March 30, 2016), up 5.18% compared with the previous day.
"Today's ruling validates MetLife's decision to seek judicial review of our SIFI designation," said MetLife's chairman, president and chief executive, Steven Kandarian.
"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."
MetLife had opposed its status as a non-bank SIFI since it was first handed the designation as it was then subject to higher capital levels and extra supervisory scrutiny under the FSOC, which was created by US Dodd-Frank legislation in 2010.
Members of the FSOC include Federal Reserve chairwoman Janet Yellen and Treasury secretary Jacob Lew.
Since launching its lawsuit in 2015, MetLife announced a plan in January to separate a substantial portion of its US retail segment in a bid to slim its way into greater capital efficiency.
MetLife’s CEO Steve Kandarian said the life insurer had been placed at a “significant competitive disadvantage” by its too big to fail status.
The New York-based firm said it was looking at structural alternatives such as a public offering of shares in an independent, publicly traded company, a spin-off, or a sale.
By the time of going to press, MetLife had not responded to questions regarding how it will now respond to the court ruling.
Back in January, MetLife said in a statement: “Even though we are appealing our SIFI designation in court and do not believe any part of MetLife is systemic, this risk of increased capital requirements contributed to our decision to pursue the separation of the business.”
The firm’s plan included the following entities in the new company: MetLife Insurance Company USA, General American Life Insurance Company, Metropolitan Tower Life Insurance Company and several subsidiaries that have reinsured risks underwritten by MetLife Insurance Company USA.
The ruling has consequences for the US insurer globally, as the Financial Stability Board (FSB), established by the G20 countries in 2009 in response to the global financial crisis, works with national level regulators, including the FSOC, to set its global systemically important insurer (G-SII) designations.
There are nine large international insurance groups currently on the FSB’s list designated as G-SIIs: Aegon, Allianz, AIG, Aviva, Axa, Ping An, Prudential Financial, Prudential PLC, as well as MetLife.
The lawsuit was filed as MetLife Inc. v. Financial Stability Oversight Council, 15-cv-00045, U.S. District Court, District of Columbia (Washington), with MetLife represented by legal firm Gibson Dunn & Crutcher.