By Lisa Lambert
WASHINGTON, July 21 (Reuters) - Heads of the U.S. financial regulatory agencies will meet behind closed doors Friday to discuss MetLife Inc's lawsuit against them, according to a notice from Treasury, as the Trump administration wrestles with reforms put in place in response to the financial crisis.
The regulators, who comprise the Financial Stability Oversight Council (FSOC), and MetLife both asked earlier this month for another pause in the long-running case in which the country's largest life insurer has challenged the federal government's decision to label it as "too big to fail." The appeals court has not yet said whether it will grant an abeyance.
More than a year ago, U.S. District Judge Rosemary Collyer struck down the council's designation of MetLife as "systemically important," which signifies that it could devastate the financial system if it failed and which triggers stricter oversight. Collyer said the label was "arbitrary and capricious." The administration of former Democratic President Barack Obama immediately appealed.
Republican President Donald Trump, however, has expressed skepticism about the designation process, and the FSOC has ordered the Treasury Department to review both. Treasury Secretary Steven Mnuchin, who chairs the council, also has said its work should be evaluated.
Both sides of the lawsuit have said the appeals court should put the case on pause until Mnuchin finishes his review. In May, the court granted a 60-day abeyance, which expired this month.
Only two other insurers - Prudential Insurance and American International Group - still carry the "systemically important" label. According to the Treasury notice, the council will also receive an update on the designation of one of the insurance companies and discuss Mnuchin's recent recommendations to change a rule on proprietary trading, commonly called the Volcker Rule, in next week's executive session.
In a June report Mnuchin suggested easing up on the Volcker rule, which restricts banks' ability to place speculative market bets. On Friday, banking regulators said they would review how the rule is being carried out to ensure that foreign funds are properly exempted.
(Reporting by Lisa Lambert; Editing by Tom Brown and Leslie Adler)