MetLife Inc is challenging its government designation as a company that is “too big to fail” because it would pose such a risk to the economy.
The designation brings with it stricter guidelines from federal overseers and the company says, exorbitant costs.
The life insurance company said on Tuesday that it will file with the US District Court for the District of Columbia to overturn the US Financial Stability Oversight Council’s designation of the New York company as a non-bank, systemically important financial institution.
Companies deemed “systemically important” are obligated to increase the money held in reserve to protect against huge losses, limit their use of borrowed money and submit to inspections by US Federal Reserve examiners.
The New York company is one of only four non-bank corporations on the list and received the designation last month, according to the US Department of the Treasury. The others are American International Group Inc, General Electric Capital Corp — the finance arm of General Electric Co — and Prudential Financial Inc.
The near-collapse of AIG in 2008 helped trigger the financial crisis and it received a US$182 billion federal bailout that it has since repaid.
MetLife Inc, which has a market capitalization of about US$57 billion, said the designation will increase costs for consumers.
“MetLife has always supported robust regulation of the life insurance industry and has operated under a stringent state regulatory system for decades,” chairman and CEO Steven Kandarian said. “However, adding a new federal standard for just the largest life insurers and retaining a different standard for everyone else will drive up the cost of financial protection for consumers without making the financial system any safer.”
Kandarian said that the council — which was created to help prevent another financial meltdown — designated non-bank systemically important financial institutions before the rules governing those companies have been written.
“The council should wait until the rules are in place and it knows the impact on designated firms,” Kandarian said.
Kandarian cited the Dodd-Frank Act, stating that the act makes it “clear that size alone does not make a company systemic.”
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