THREE US banks and an insurer that failed Federal Reserve stress tests last night signalled the start of a battle with the regulator.
MetLife, the largest life insurer in the US, led the criticism after it was denied permission for a $2bn (£1.27bn) share buyback and a 49 per cent increase in its annual dividend. The Fed judged its capital ratio in a new crisis to be 6.3 but failed it on risk grounds.
Chief executive Steve Kandarian said the Fed’s assumptions were “bank-centric” and wrong for insurance companies. MetLife is regulated as a bank holding company because of its online retail banking operations – although they are being sold to General Electric.
Citigroup, which caused the biggest shock when its capital ratio came out of the stress tests at 4.9 per cent, called on the Fed to release more details of its models and said it would “engage further” with the regulator.
Ally Financial described the results as “inconsistent” and said: “The analysis dramatically overstates potential contingent mortgage risk, especially with respect to new vintages of loans.”
SunTrust said its own models are “significantly more favourable” than those of the Fed and said it expected to beat quarterly earnings estimates.