WASHINGTON — A federal appeals court has scheduled oral arguments in a case that could have profound implications for the government's ability to designate nonbanks as systemically risky.
In an Aug. 23 filing, the U.S. Court of Appeals for the D.C. Circuit said it will hear oral arguments on Oct. 24 in the case of MetLife v. Financial Stability Oversight Council.
The case is the FSOC's appeal of a
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Twenty current and former Democratic members of Congress sided with the Financial Stability Oversight Council in a legal brief filed Thursday, arguing that its designation of MetLife as a systemically important financial institution should not have been struck down in federal court.
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WASHINGTON The Financial Stability Oversight Council fired another salvo late Thursday in an ongoing legal battle over its decision to designate MetLife as a systemically important financial institution.
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In an initial regulatory move released by the Federal Reserve Friday, the central bank was emphatic about distinguishing between the capital and liquidity risks posed by insurance activities versus the riskier ones that firms may be engaged in.
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The FSOC argued in its June appeal that the ruling was "profoundly mistaken" and if left unchallenged would undermine the council's discretion in how and whether to subject nonbanks to heightened prudential controls.
MetLife was the most recent nonbank to be designated by the FSOC, in December 2014, but the company filed suit almost immediately, in January 2015, to challenge its designation. The challenge was seen by many observers as a long shot, given the deference that federal judges typically give to executive decisions.
If the appeals court — and, depending on the outcome, Supreme Court — upholds the lower court's ruling, it could have profound implications not only on the FSOC's ability to regulate nonbanks, but could have implications for other regulatory agencies as well.
MetLife was one of only a handful of other firms to have been so designated — joining fellow insurers American International Group and Prudential and GE Capital. But today only Prudential and AIG remain designated SIFIs. GE Capital last year announced that it intended to spin off most of its financial businesses in large part to avoid the SIFI label, and in June the FSOC agreed to rescind its designation. MetLife also announced earlier this year that it would break itself into two separate businesses — a move many presumed to be related to its SIFI designation.