Council Names MetLife for Consolidated Supervision and Enhanced Prudential Standards
WASHINGTON – The Financial Stability Oversight Council (Council) today announced that it voted to designate a nonbank financial company to address potential threats to financial stability. The Council used its authority under Title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) to subject MetLife, Inc. to consolidated supervision and enhanced prudential standards. The vote was nine to one.
“After a year and a half of extensive and in-depth analysis – including significant engagement with the company – the Council has determined that material financial distress at MetLife could pose a threat to U.S. financial stability,” said Treasury Secretary Jacob J. Lew, Chairperson of the Council. “Designation of a nonbank financial company is a critical tool for the Council to address potential threats to U.S. financial stability. Consistent with its mandate, the Council remains focused on protecting the broader economy from the types of risk that contributed to the financial crisis.”
The Council’s designation of a nonbank financial company subjects the company to supervision by the Board of Governors of the Federal Reserve System (Board of Governors) and to enhanced prudential standards. Consistent with the statutory standard for designations by the Council, the Council determined that material financial distress at this company – if it were to occur – could pose a threat to U.S. financial stability. This does not constitute a determination that the company is currently experiencing, or is likely to experience, material financial distress. The Council’s authority to make designations is an important tool to mitigate risks to financial stability posed by individual companies and to provide enhanced prudential standards under which those companies must operate. MetLife is the fourth company that has been designated by the Council. In 2013, the Council designated Prudential Financial, American International Group and General Electric Capital Corporation. Under a separate authority, in July 2012 the Council designated eight systemically important financial market utilities for enhanced risk-management standards.
The basis for the company’s designation announced today is available at www.fsoc.gov.
The Dodd-Frank Act sets forth the standard for the Council’s designation of a nonbank financial company and requires the Council to take into account 10 specific considerations when evaluating those companies. To further inform the public of the Council’s framework and processes for assessing nonbank financial companies, the Council voluntarily developed a rule and interpretive guidance, beginning with the release of an advance notice of proposed rulemaking at its very first meeting in October 2010. The Council received the benefit of three rounds of public comment before finalizing its rule and guidance.
The Council engages in a thorough, three-stage process when assessing nonbank financial companies for potential designation. In Stage 1, the Council applies uniform quantitative thresholds to identify nonbank financial companies for further evaluation. In Stage 2, the Council analyzes the nonbank financial companies identified in Stage 1 using a broad range of information available to the Council primarily through existing public and regulatory sources. In Stage 3, the Council contacts each nonbank financial company that the Council believes merits further review to collect information directly from the company that was not otherwise available in the prior stages. Each nonbank financial company that is reviewed in Stage 3 is immediately notified that it is under consideration and is provided an opportunity to submit written materials related to the Council’s consideration of the company for a proposed designation. Further information about the Council’s process, including a set of frequently asked questions and answers, are available on its website at www.fsoc.gov. The vote announced today follows a thorough process and comprehensive analysis carried out in accordance with the Council’s rule and guidance.
On July 16, 2013, the Council notified MetLife that the company was under consideration for a proposed determination by the Council. After over a year of engagement between the Council and MetLife, the company received a notice on September 4, 2014, informing it that the Council had made a proposed designation and providing it with an explanation of the basis of the Council’s proposed designation. The company requested a written and an oral hearing to contest the Council’s proposed determination. The Council granted the request and held an oral hearing on November 3. Today’s announcement represents a final designation of the company. The Council will, at least annually, reevaluate its designation of MetLife and rescind the designation if the Council determines that the company no longer meets the statutory standards for designation.
Further information regarding the process for the Council’s nonbank financial company designations and the Council’s resolutions and basis for its designations is available at www.fsoc.gov.
Use featured image