MetLife scored a major coup earlier this year when it was able to persuade regulators to remove it from a list of institutions that are too big to fail and thus subject to tighter scrutiny. Now, some of its peers may face increased pressure to follow suit.
Shedding the onerous label of being a Systemically Important Financial Institution marked a milestone both for MetLife and the insurance industry. The list, an outgrowth of the financial crisis and an effort by regulators to rein in big Wall Street institutions, puts financial firms under the microscope of the Fed and the Financial Stability Oversight Council.
Among other things, the 2014 designation subjected MetLife and the other two insurers on the list, American International Group and Prudential, to stress tests and capital requirements along the lines of those applied to major banks. MetLife had argued that the Treasury Department's decision to include the firm on the SIFI list was arbitrary and capricious and that MetLife did not pose a systemic risk along the lines of big banks.
Though the Treasury Department has appealed the ruling, it may have to fight the battle on multiple fronts. Ratings firm Moody's believes investors are going to continue to pressure Prudential and AIG into trying to get off the SIFI list as well.