Federal Reserve Vice Chairman Janet Yellen said the central bank should tailor regulations for non-bank financial companies such as insurers that may fall under Fed oversight, because their businesses are different than banks.
“One-size-fits-all should not be the model for regulation,” Yellen said in response to a question from Senator Jon Tester, a Democrat from Montana, during a Senate Banking Committee hearing to consider her nomination to be Fed chairman. “We need to develop appropriate models for regulation and supervision of different kinds of institutions.”
The Dodd-Frank Act gives regulators the authority to place insurance companies and other non-bank financial institutions under Fed supervision if they are large enough to pose systemic risk to the financial system. Companies such as New York-based MetLife Inc. argue that their businesses aren’t suited to bank-like regulation in part because their liabilities are in the form of policies rather than short-term deposits.
Insurance companies have “some very unique features that make them very different from banks and we’re taking the time to try to study what the best way is to craft regulations that would be appropriate for those organizations,” Yellen said.
Prudential Financial Inc., American International Group Inc. and General Electric Co.’s finance unit have been designated systemically important, placing them under Fed oversight. MetLife, the largest U.S. life insurer, has said it’s under consideration for the risk label.
Yellen appeared before the committee today to answer questions about Fed policy and oversight. President Barack Obama nominated her last month to serve as Fed chairman when Ben S. Bernanke’s term ends Jan. 31.
To contact the editor responsible for this story: Chris Wellisz at firstname.lastname@example.org