MetLife said it would file on Tuesday a lawsuit against regulators subjecting it to tougher oversight, challenging their verdict the firm harbours enough risk to endanger the financial system in a crisis. The company, the largest US life insurer, unsuccessfully contested the decision by the Financial Stability Oversight Council (FSOC) in a hearing last month, and a lawsuit was its last resort to escape being overseen by the US Federal Reserve.
The designation of MetLife as a so-called "systemically important" company would make insurance products more expensive without actually enhancing financial stability, it said. "FSOC's designation of MetLife is premature," MetLife Chief Executive Steve Kandarian was quoted as saying in a statement. "The Council should wait until the rules are in place and it knows the impact on designated firms."
The remark was a reference to the Fed, which has yet to come up with capital rules for insurers. The industry is often skeptical that the central bank, which has long overseen banking, has enough expertise regulating insurers. A spokeswoman for the Treasury Department, which houses FSOC, said, "We have been notified of MetLife's complaint. The Council's decision to designate a nonbank financial company is reached only after a thorough analysis and extensive engagement with the company, both of which occurred in this case. We are confident in the Council's work."
The 2010 Dodd-Frank act to reform Wall Street after the 2007-2009 financial crisis put more onerous regulatory demands on the largest banks, and authorised FSOC to subject other large and risky firms such as insurers to a similar regime. AIG, which almost collapsed during the credit meltdown, is now overseen by the Fed, as is Prudential Financial Inc Including MetLife, the Fed would oversee almost a third of the entire industry in America, a study showed last year.
MetLife said it would file its lawsuit in the US District Court for the District of Columbia. It had hired Gibson, Dunn & Crutcher LLP and Sullivan & Cromwell LLP as its law firms. Eugene Scalia, a lawyer at Gibson Dunn, is on MetLife's team to help it with the lawsuit. The son of Supreme Court Justice Antonin Scalia, he has a track record of successfully fighting decisions by federal regulators.
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