WASHINGTON — The Financial Stability Oversight Council said Thursday it would agree to delay for 60 days any verdict in its ongoing appeal of a lower court decision vacating its designation of insurance giant MetLife as a systemically important financial institution.
MetLife had called for the FSOC’s appeal to be held in abeyance — that is, effectively tabled — for 180 days pending the outcome of the Treasury Department’s presidentially directed review of the process for designating nonbanks as SIFIs. The council said in its May 4 reply to the motion that it has not had an opportunity to deliberate with its members to determine a course of action in the appeal.
“We do not take a position at this time on MetLife’s motion to hold the case in abeyance until the report is issued,” the FSOC said. “We consent, however, to a more limited period of abeyance to allow the Council and the Department of Justice to complete their deliberations. In particular, we consent to a 60-day abeyance, at the end of which time the government respectfully requests leave to file a status report.”
The FSOC was created by the Dodd-Frank Act and was tasked with identifying sources of risk to the financial system and regulating them. Among the powers entrusted to FSOC was the power to designate a nonbank as a SIFI, thus subjecting the designated firm to heightened prudential requirements and Federal Reserve supervision. The council’s members include the heads of the various financial regulatory agencies and whose ten voting members include the Secretary of the Treasury (the council chair), the chair of the Federal Reserve, the Comptroller of the Currency and the chair of the Federal Depository Insurance Corp., among others.
The coucil designated MetLife as a SIFI in December 2014, and the firm sued the FSOC early the following year, saying that the interagency council had relied on an erroneous set of assumptions about the insurer’s vulnerability to market fluctuations to decide that it was a source of systemic risk. A D.C. District Court judge agreed in March 2016, vacating the FSOC’s designation. The council promptly appealed the decision, and the DC Circuit judges who heard the case appeared to be sympathetic to the agency’s arguments.
Since the presidential election, however, there has been mounting pressure for the FSOC to drop its appeal — most notably from a group of Senate Republicans who called on Treasury Secretary Steven Mnuchin to unilaterally end the case. Mnuchin’s ability to do that is somewhat vague, but Thursday’s reply suggests that at least a temporary reprieve from a court ruling is in effect.