The U.S. District Court for the District of Columbia has overruled the Financial Stability Oversight Council ("FSOC") decision to designate MetLife as a systemically important financial institution ("SIFI"), holding that the FSOC failed to adequately assess MetLife’s vulnerability to severe financial distress. MetLife Inc. v. Financial Stability Oversight Council, 15-cv-00045, U.S. District Court, District of Columbia (Washington).
The federal court decision marks a significant victory for those who oppose the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Pub. L. 111-203, H.R. 4173) (Dodd-Frank Act) financial overhaul. On the heels of the 2008 financial crisis, the Dodd-Frank Act empowered regulators to classify certain large non-bank institutions as systemically important and subject them to regulation and increased capital requirements by federal regulators in a fashion similar to the regulation of banks.
Though Judge Collyer’s opinion is currently under seal, her order issued on March 30 provides that she has upheld arguments that regulators failed to adequately assess the insurance company’s vulnerabilities to extreme financial distress and the potential economic impact of the designation.
While MetLife, the largest life insurer in the United States, views the decision as a clear victory, the United States Department of Treasury has vowed to continue to defend the “designation progress vigorously,” in order to eliminate threats to the United States financial system.
The Federal Reserve is in the process of drafting new rules to oversee insurance companies deemed systemically important. Whether the District Court’s ruling in the MetLife matter will forestall continued federal regulation of insurance companies remains to be seen.