Federal Reserve Vice Chairman Janet Yellen said the central bank will “carefully consider” how to apply new regulatory standards to insurance companies that fall under the central bank’s supervision.
The Dodd-Frank Act gives regulators the authority to place insurance companies and other non-bank financial institutions under Fed supervision if they are large enough to pose systemic risk to the financial system.
Companies such as New York-based MetLife Inc. argue that their businesses aren’t suited to bank- like regulation in part because their liabilities are in the form of policies rather than short-term deposits. State insurance regulators have also criticized applying bank-like rules to insurers.
In a written response to questions from Louisiana Republican Senator David Vitter, Yellen pointed out that Dodd- Frank does not permit regulators to apply minimum capital requirements that are lower than those for banks.
“The Board continues to carefully consider how to design capital rules for Board-regulated companies that are insurance companies,” Yellen wrote in her response.
President Barack Obama nominated Yellen last month to serve as Fed chairman when Ben S. Bernanke’s term ends Jan. 31. Yellen appeared before the Senate Banking Committee last week in a hearing on her nomination.
During her Senate nomination hearing, Yellen said she believes that the insurance industry and other non-bank institutions deserve better than being subject to a “one-size-fits-all” regulatory scheme created for banks.
She also agreed that community banks also merit a regulatory scheme that fits their own business model rather than that of large systemically important banks.
–Editors: Kevin Costelloe, Chris Fournier