Prudential Said to Get DeMarco’s Backing to Avoid SIFIIan Katz and Zachary Tracer
Prudential Financial Inc., the insurer contesting a decision deeming it systemically important, won the support of the Federal Housing Finance Agency during a vote of U.S. regulators last month, two people familiar with the matter said.
The Financial Stability Oversight Council voted 7-2 to designate an unidentified company as systemically important, meaning the firm could endanger the financial system if it were to fail, according to minutes of the June 3 meeting released yesterday by the Treasury Department. The company was Prudential, said the people, who asked not to be identified because the information wasn’t officially released.
The FHFA’s acting director, Edward DeMarco, voted “no,” as did Roy Woodall, a former Kentucky state insurance commissioner who is the council’s independent member with insurance expertise, the panel said.
Prudential is the only one of three companies appealing the FSOC’s ruling subjecting them to heightened Federal Reserve oversight. The Newark, New Jersey-based insurer said on July 2 that it requested a hearing so the company can explain why it shouldn’t be designated.
The Fed could impose stricter capital and liquidity standards on systemically important firms. Bob DeFillippo, a Prudential spokesman, declined to comment yesterday.
MetLife Inc., the largest U.S. life insurer, announced yesterday that it had been moved to the last stage of review to be designated as systemically important. Chief Executive Officer Steven Kandarian said that MetLife poses no danger to the economy and an “unlevel playing field” may result when only some insurers are subject to heightened scrutiny.
“Not only does exposure to MetLife not threaten the financial system, but I cannot think of a single firm that would be threatened by its exposure to MetLife,” Kandarian, 61, said in a statement. “The life-insurance industry is a source of financial stability.”
MetLife fell 0.8 percent to $47.66 at 9:55 a.m. in New York and Prudential declined 0.2 percent to $77.18.
MetLife “will continue to strenuously oppose this designation,” Cathy Seifert, an equity analyst at Standard & Poor’s Capital IQ, said in a research note. “While we share some of MET’s concerns, we also see opposing this designation as a no-win situation.”
GE Capital, AIG
The FSOC, led by Treasury Secretary Jacob J. Lew, voted 10-0 to designate American International Group Inc. and 9-0 on General Electric Co.’s finance unit. Neither company appealed the decision.
The Dodd-Frank financial overhaul law, designed to avoid a repeat of the 2008 bailouts, increased supervision of the largest U.S. lenders and allowed the FSOC to designate non-bank firms for extra oversight.
The FSOC has 10 voting members, including Fed Chairman Ben S. Bernanke and the chairmen of the Securities and Exchange Commission, Federal Deposit Insurance Corp. and Commodity Futures Trading Commission.