Metlife: FSOC “Too-Big-to-Fail” Designation

On March 30, Judge Rosemary Collyer of the U.S. District Court for the District of Columbia invalidated the Financial Stability Oversight Council’s (“FSOC”) designation of MetLife as a systemically important financial institution (“SIFI”). [1] Although the court found that MetLife may be deemed “predominantly engaged” in “financial” activities and therefore eligible for designation as a SIFI, the court found “fundamental violations of administrative law” and a designation process that was “fatally flawed.” In particular, the court determined that FSOC did not follow its own published standards for SIFI-designation: it did not assess MetLife’s likelihood of failure, but simply assumed that a failure would occur, and never attempted to quantify or estimate the actual consequences of a failure to the financial system. In addition, FSOC failed to consider the costs associated with designating MetLife as a SIFI. Accordingly, the court determined that FSOC’s decision was “arbitrary and capricious,” and granted MetLife’s motion for summary judgment to rescind its SIFI designation.

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