WASHINGTON (AP) — U.S. regulators are proposing to label insurer MetLife Inc. as a potential threat to the financial system, a designation that brings stricter government oversight.
New York-based MetLife says it "strongly disagrees" with the decision by the Financial Stability Oversight Council on Thursday to propose designating the company as "systemically important." That would mean the company was deemed so big and interconnected that it could cause damage to the financial system if it failed.
If the designation becomes final, MetLife would have to increase its cushion of capital against losses, limit its use of borrowed money and submit to inspections by examiners. The company would come under the supervision of the Federal Reserve. Its primary regulator now is the state of New York.
Congress created the regulators' council after the 2008 financial crisis to monitor markets and prevent another crisis and taxpayer bailout. It is led by Treasury Secretary Jack Lew and includes other top regulators such as Federal Reserve Chair Janet Yellen. Regulators saw a need for closer oversight of big nonbank financial companies after the near-collapse of American International Group Inc. threatened to bring down the financial system during the 2008 crisis.
The biggest banks already were under the Fed's supervision, and the overhaul law brought strict new rules for them, such as on the amount of capital they must hold to cover potential losses. Nonbank companies that are designated as systemically important are also subject to those rules.
MetLife would be the fourth financial firm that is not a bank to be named systemically important. Last year the council tagged AIG, General Electric Co.'s finance arm GE Capital and insurer Prudential Financial Inc. as such.
MetLife said it may fight the designation. The company said in a statement that it was not systemically important under the criteria of the 2010 financial overhaul law. The insurer argues that its industry is less risky than banking, and that imposing bank capital rules on life insurance companies would make it harder for Americans to buy insurance products.
MetLife will have 30 days to request a hearing with the council to dispute the council's decision. In order for the designations to become final, the council must vote a second time, with at least two-thirds of the 10 voting members agreeing.