The Trump administration is dropping an appeal against a contentious legal ruling that ended Metlife’s designation as “too big to fail”, further undermining a financial safety regime established under President Obama.

Almost two years ago a district court sent shockwaves through Wall Street and Washington when it threw out the authorities’ labelling of MetLife as a “systemically important financial institution” (Sifi) that needed tougher regulation.

The government appealed, arguing Metlife was clearly a large, interconnected financial institution whose failure would threaten financial stability.

However, the Trump administration has targetted the Sifi regime as part of its deregulatory push. On Thursday a council led by Treasury secretary Steven Mnuchin filed a motion to dismiss the case.

Last year it dropped AIG’s designation. Prudential Financial is the only remaining non-bank Sifi in the US.

Ian Katz, policy analyst at Capital Alpha, said he also sees Prudential’s “escape from the Sifi dungeon” as “inevitable”.

“It’s mainly a matter of Prudential going through the bureaucratic process required by [the council's]rules.”

In a sign officials want to limit the wider legal ramifications of the original Metlife judgement, however, both the company and the government asked the court to “vacate” a part of its ruling. The court had concluded officials should have undertaken a “cost-benefit analysis” when designating MetLife, a decision lawyers warned could undermine bureaucratic decision making.

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