MetLife Is No Longer a Bank Holding Company

On February 14, MetLife, Inc. announced it had completed its deregistration and is no longer a bank holding company.

This came as no surprise; more than two years ago the company made known its intentions (see here for a piece I wrote at the time) and since then has actively sought to shed banking-related assets. Yet its deregistration is significant, in part because it is at odds with the regulatory push to improve financial stability and reduce systemic risk. By shedding its bank holding company status, MetLife loses the Federal Reserve as its primary regulator.

As of 9/30/12, MetLife ranked 6th in total assets among the Top 50 holding companies (see current Top 50 list here). By virtue of its participation in the 2009 Supervisory Capital Assessment Program (SCAP), its size and holding company status meant that it would be required to participate in the upcoming round of Comprehensive Capital Analysis and Review (CCAR), the stress tests conducted by the Federal Reserve (see page 62381 and particularly footnote 19 of the Federal Register notice detailing this). MetLife was one of four companies that “failed” the CCAR in March 2012 and has been critical of both the stress tests and capital regulations being applied to insurance companies in the same way as banks.

Without its BHC status, it’s not clear that MetLife still will be subject to the next CCAR or the rigorous supervisory oversight that comes with being a BHC. Arguably the oversight of the insurance regulators and potential designation as systemically important by the Financial Stability Oversight Council will substitute.

MetLife was ahead of the game five years ago when a wave of companies scrambled to become bank holding companies in order to have access to the Fed’s lending facilites; unlike many of those other companies, MetLife had been a BHC well before that time.

In the immediate aftermath of the 2008 crisis, regulatory attention has focused on the risk the largely unregulated shadow banking system poses to financial stability. As a result the shadow banking system was hit hard, according to CFS estimates (see here) but more recently has shown signs of recovering. It just got a large boost from MetLife joining its ranks.

For more information on the shadow banking system, see:
Pozsar, Zoltan, Tobias Adrian, Adam Ashcraft, and Hayley Boesky (2010), “Shadow Banking,” Federal Reserve Bank of New York Staff Report No. 458, revised February 2012, available here (links to external NY Fed website).