Congressional Letter Highlights Awkward Consequence of MetLife Case -- Update
April 11 2016 - 5:45PM
Dow Jones News
By Ryan Tracy
A letter sent to Treasury Secretary Jacob Lew by a member of
Congress on Monday highlights the awkward international
consequences of a U.S. federal judge's decision to rescind federal
oversight of MetLife Inc.
Rep. Scott Garrett (R., N.J.), chairman of the House Financial
Services Committee's subcommittee on capital markets, wrote to Mr.
Lew asking how, after the decision, the U.S. now will proceed with
applying new regulatory standards to insurers designated "
systemically important."
The awkward subtext: The U.S. effectively has promised other
countries it will apply tighter standards to MetLife, but the
federal government no longer has the authority to do so. That could
be reversed if the Obama administration wins the case on appeal, a
process that could take months.
Mr. Garrett's criticisms are ones long held by the U.S.
insurance industry and state insurance regulators regarding the
Financial Stability Board, a group of global regulators from the
U.S. and other countries.
On July 18, 2013, the FSB published a list of insurance
companies it called "globally systemically important insurers" and
agreed they should face tighter supervision. The Treasury
Department, the Federal Reserve and Securities and Exchange
Commission are U.S. representatives on the FSB. Since the FSB
operates by consensus, Mr. Lew and other FSB members effectively
endorsed the list of globally systemically important insurers.
That has long irked the insurance industry and regulatory
critics such as Mr. Garrett, who point out the list was developed
before U.S. regulators on the U.S. Financial Stability Oversight
Council decided to apply stricter rules to domestic insurance
companies. MetLife was on the July 2013 FSB list, along with rivals
American International Group Inc. and Prudential Financial Inc.,
but MetLife wasn't designated "systemically important" in the U.S.
until December 2014. Prudential received the label in September
2013, and AIG received it July 8, 2013.
Mr. Garrett on Monday asked for a series of documents from Mr.
Lew related to the FSB work. He also asked whether Mr. Lew plans to
continue pursuing the stricter international standards the U.S. has
agreed to apply to MetLife, now that the court has rescinded the
federal government's authority to do so.
MetLife is still overseen by state regulators, including in its
home state of New York, and it is possible those regulators could
take the view the firm deserves stricter rules because of its size
and potential impact on the economy. But state regulators aren't
part of the FSB -- a fact that has long frustrated them -- so it is
far from clear that they would keep up the U.S. end of the
international bargain.
A Treasury spokesman said the department has received the letter
and is reviewing it.
Mr. Lew previously has said that the U.S. and international
processes for determining "systemically important" firms are
separate and that U.S. regulators made their own decision about
applying stricter rules MetLife and the other firms without regard
to any international agreement.
Write to Ryan Tracy at ryan.tracy@wsj.com
(END) Dow Jones Newswires
April 11, 2016 17:30 ET (21:30 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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