January 13, 2016
Financial Firms Really Hate Being SIFIs
Posted by David Zaring

For those who believe that bank regulators are totally captured, I give you MetLife's very grudging decision to maybe break itself up in an effort to get undesignated as a systemically important financial institution, subject to extra capital requirements and Fed supervision.  GE hated being a SIFI so much that it got out of of the business of finance.  MetLife was so outraged by its designation that it sued.  And the enormous asset managers, such as BlackRock, watching this must be terrified that they will be designated next.

The exception?  Very large banks, who were already subject to Fed supervision, aren't trying to get smaller, or at least haven't so far.  It could be that one of the things that they consider to be part of their skill set is dealing with regulators.  For those who grew into prominence with other skills, regulatory management is clearly not worth the candle.  But that's what big banks do.

Anyway:

The giant insurer MetLife said on Tuesday that it was exploring spinning off its retail life and annuity business in the United States because of financial pressures it is facing under regulations put in place in the wake of the financial crisis.

The decision was made two years after the Financial Stability Oversight Council, a group created by the 2010 Dodd-Frank regulatory legislation, named MetLife a systemically important nonbank financial institution, or SiFi. That designation carries requirements to set aside more capital as a cushion against a substantial decline in the nation’s financial markets as occurred in 2008, potentially limiting its earnings.

MetLife is considering several options, including an initial public offering to create a company that would, presumably, be better able to compete with smaller life insurance and annuity providers who are not subject to the same regulatory restrictions.

Administrative Law, Finance, Financial Institutions | Bookmark

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