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MetLife, Prudential Propose Alternatives to Bank-Like Oversight

MetLife, Prudential Propose Alternatives to Bank-Like Oversight: MetLife Inc. and Prudential Financial Inc. have been joined by state regulators challenging the Federal Reserve (Fed) on how to oversee the biggest insurers under the Dodd-Frank law...
July 10, 2013

MetLife, Prudential Propose Alternatives to Bank-Like Oversight: MetLife Inc. and Prudential Financial Inc. have been joined by state regulators challenging the Federal Reserve (Fed) on how to oversee the biggest insurers under the Dodd-Frank law. The insurers and regulators are pressuring the Fed to avoid bank-like capital rules for firms that may eventually fall under central bank oversight. MetLife has proposed alternative rules that it said is more appropriate for insurers deemed systemically important financial institutions (SIFIs). Prudential also proposed alternative rules and is weighing whether or not to challenge the ruling. Both companies say they are not systemically risky.

“No amount of ‘tailoring’ will ever make bank capital standards fit a life insurer’s balance sheet,” MetLife Chief Executive Officer Steven Kandarian said in a speech in Washington. “There is a better way.” The Dodd-Frank Act of 2010 empowered a council of regulators to declare non-bank financial institutions as potential threats to financial stability because of their scope, size or interconnectedness, placing them under Fed supervision. While large banks automatically qualify for such supervision, the bailout of AIG led federal officials to declare AIG, General Electric and Prudential as systemically important. MetLife says it may face the same designation.

Fed Chairman Ben S. Bernanke told lawmakers in March 2009 that saving AIG made him “more angry” than any other measure the government undertook to counter the financial crisis. “AIG exploited a huge gap in the regulatory system; there was no oversight of the financial-products division,” Bernanke said. “This was a hedge fund basically that was attached to a large and stable insurance company.”

MetLife Challenges Fed with New Plan (Bloomberg 7/2/13)

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