Who's systematically important? Fed's not saying

MetLife Inc.,(NYSE:MET-A) the largest U.S. life insurer, is struggling to understand what to expect from the Federal Reserve as regulators in Washington weigh how to increase oversight of the industry.

“The hardest question to answer is, ‘What will the capital rules be?’” MetLife Chief Financial Officer John Hele said today in a conference sponsored by Deutsche Bank AG. “We’ve had no insight yet into how they will be thinking about this.”

MetLife, led by Chief Executive Officer Steve Kandarian, hasn’t announced share buybacks since 2008 amid uncertainty over rules the New York-based insurer could be subjected to if it’s deemed a systemically important financial institution, or SIFI. Kandarian has said the company doesn’t deserve the risk tag, and wrote to investors this year that it’s taken longer “than anyone had anticipated” to get clarity on regulations.

“They’d be great poker players, the Washington Fed, because they don’t give much of a response,” Hele said today. “They listen. They nod. They ask a lot of questions, but it’s hard to tell where they’re going to come out.”

MetLife gained 2.3 percent to $51.92 at 11:16 a.m. in New York. The stock has declined 3.7 percent this year, trailing the 3.4 percent advance of the Standard & Poor’s 500 Index.

The Federal Reserve, led by Chair Janet Yellen, has increased supervision of the largest banks under the 2010 Dodd- Frank Act, the law designed to avoid bailouts of financial firms. A panel that’s led by Treasury Secretary Jacob J. Lew and includes Yellen has already designated insurers American International Group Inc. and Prudential Financial Inc. as non- bank SIFIs.

The central bank hasn’t specified final capital rules governing insurers that are deemed SIFIs. Kandarian has said that the Fed’s decision could affect both shareholders and customers.

“If federal capital rules for life insurers do not appropriately reflect the business model of insurance, we could be forced to raise prices to consumers or exit markets entirely,” Kandarian told shareholders in a March letter. “Regulators in Washington must recognize that imposing higher capital requirements on certain life insurance companies is not cost-free.”

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