Overview of MetLife, Inc. v. Financial Stability Oversight Council
Today, MetLife, Inc. filed a complaint in U.S. District Court in Washington, D.C.,
challenging the decision of the Financial Stability Oversight Council (FSOC) to designate MetLife
as a “systemically important” non-bank financial institution (non-bank SIFI) under the Dodd-Frank
Wall Street Reform and Consumer Protection Act. In its designation decision, FSOC concluded
that material financial distress at MetLife “could pose a threat to the financial stability of the United
States,” but acknowledged that it had not undertaken any assessment of whether MetLife is actually
vulnerable to such distress.
Designation as a non-bank SIFI subjects MetLife to oversight by the Federal Reserve Board,
including to enhanced “prudential standards” that, among other new requirements, could obligate
MetLife to hold elevated levels of capital. Those new standards, in turn, could force MetLife to
increase the price of its products, divest certain investments that support MetLife’s life insurance
operations, or stop offering certain products altogether. Designation will also place MetLife at a
serious competitive disadvantage because FSOC has only designated one other life insurance
company, Prudential. MetLife will therefore be subject to a very different set of federal regulatory
requirements than the overwhelming majority of its hundreds of other competitors.
In its complaint, MetLife contends that FSOC failed to comply with the statutory
requirements and its own rules governing designation, and that, contrary to FSOC’s conclusions,
MetLife’s life insurance business does not pose risks to the broader economy comparable to those
of a large bank. In particular, FSOC reached its decision to designate MetLife by misconstruing
and disregarding MetLife’s evidence and arguments in four important respects.
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First, FSOC failed to appreciate the comprehensive state insurance regulatory regime that
supervises every aspect of MetLife’s U.S. insurance business. Each of MetLife’s U.S. insurance
subsidiaries is already subject to extensive state laws and regulations that require maintenance
of conservative capital levels and the diversification of risks—from insureds to investment
portfolios—and that provide for prompt state-regulatory intervention in the event that a
subsidiary experiences financial distress.
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Second, FSOC fixated on MetLife’s size and so-called interconnections with other financial
companies—factors that, considered alone, would inevitably lead to the designation of virtually
any large financial company—and ignored other statutorily mandated considerations that
weighed sharply against designation.
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Third, FSOC relied on vague standards, unsubstantiated speculation, and unreasonable
assumptions that are inconsistent with historical experience (including prevailing conditions in
the 2008 financial crisis), basic economic teachings, and accepted principles of risk analysis.
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Fourth, FSOC denied MetLife access to data and materials consulted and relied on by the
Council in making its designation determination, thereby depriving MetLife of a meaningful
opportunity to rebut FSOC’s assumptions or otherwise respond to its analysis, in violation of
MetLife’s due process rights.
On these grounds and others, MetLife is asking the Court to set aside FSOC’s decision
designating it a non-bank SIFI. Once a schedule has been established by the Court, the next step is
likely to be that MetLife and FSOC file briefs setting forth their arguments and asking the Court to
rule in their favor. An oral argument before the Court would follow. Either side could appeal a
decision to the U.S. Court of Appeals for the District of Columbia Circuit.