U.S. Asks Judge to Throw Out MetLife ‘Too Big to Fail’ Suit

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MetLife Inc. Chief Executive Officer Steve Kandarian
MetLife Inc. Chief Executive Officer Steve Kandarian, said, “we’ve not yet seen draft capital rules, and there is no clarity on when those rules will be issued.” Photographer: Simon Dawson/Bloomberg

MetLife Inc.’s lawsuit challenging its designation by regulators as critical to the economy should be thrown out, U.S. Justice Department lawyers told a court, without immediately making public their reasoning.

The government asked Friday that the case be dismissed, filing its supporting reasons under seal. It’s to consult with MetLife, agree on redactions to protect confidential business information and file a public version of its arguments by May 18, U.S. District Judge Rosemary Collyer in Washington said in an order.

MetLife in January became the first nonbank to challenge a decision by a panel of regulators, led by the Treasury secretary, that it is a systemically important financial institution, or SIFI, subject to stricter oversight -- “too big to fail” in short.

The insurer argued that it’s already subject to comprehensive state supervision and more federal oversight would raise consumers’ costs.

MetLife was the fourth company other than banks to receive the “systemically important” label from the Financial Stability Oversight Council. It means regulators think a company’s failure might pose risks to the financial system, without implying that the company is in danger.

In response to a request by the judge, the Federal Reserve and the Federal Deposit Insurance Corp. extended MetLife’s deadline to file a so-called living will, describing how it would unwind itself in a bankruptcy, till the end of next year.

Delay Request

Collyer asked for the delay so she can rule on pretrial motions that might end the case before MetLife has to spend time and money preparing the document, according to court papers.

MetLife lowered its 2016 return-on-equity forecast on Thursday, in part because of the lack of clarity over what the “too big” designation will mean for capital requirements.

“The regulatory environment remains uncertain,” Chief Executive Officer Steve Kandarian said on a call with investors. “We’ve not yet seen draft capital rules, and there is no clarity on when those rules will be issued.”

The designation also limited buybacks and damped deals, according to Kandarian.

“We have been cautious on share repurchases because capital requirements remain unknown for nonbank systemically important financial institutions,” Kandarian said. “There are some things we would probably be less likely to pursue in that environment than if that environment didn’t exist.”

The three other nonbanks labeled systemically important are insurers American International Group Inc. and Prudential Financial Inc. and General Electric Co.’s finance arm.

The case is MetLife Inc. v. FSOC, 15-cv-00045, U.S. District Court, District of Columbia (Washington).

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