BlackRock, FDIC Seek to End Regulatory Row Over Bank Stakes

The ongoing regulatory tussle between BlackRock, the world's largest asset manager, and the Federal Deposit Insurance Corporation (FDIC) has reached a critical juncture, with both parties seeking to resolve their differences over the oversight of BlackRock's investments in FDIC-regulated banks. The dispute, which has been simmering for months, centers around the FDIC's demands for enhanced scrutiny of BlackRock's stakes in US banks, with the asset manager pushing back against what it sees as overly burdensome regulations.



In a letter obtained by Bloomberg News, BlackRock's head of US regulatory affairs, Ben Tecmire, asked the FDIC for an extension until at least March 31 to finalize a new regulatory framework, arguing that the two-week deadline set by the agency was insufficient for a thorough review. Tecmire also expressed concern that the proposed agreement could duplicate existing oversight by the Federal Reserve, leading to inconsistent and uncertain requirements for BlackRock.

The FDIC, however, has been pushing for more oversight of large asset managers like BlackRock, arguing that their size and concentrated ownership could give them undue influence over the management and strategy of US banks. In December, the FDIC reached a similar passivity agreement with Vanguard, which requires external and internal audits to verify that the asset manager is not seeking to influence the management or control the board of directors of a lender.

BlackRock has maintained that its investment approach is passive, and that it does not engage in active management or control of the companies in which it invests. The asset manager has also argued that existing oversight, including by the Federal Reserve, already provides assurance that index funds are acting passively rather than exercising control of banks.

The regulatory row between BlackRock and the FDIC has raised important questions about the influence of large asset managers in the financial sector, as well as the potential risks associated with their substantial ownership stakes in multiple banks. As the negotiations between the two parties continue, it remains to be seen whether they will be able to reach a mutually agreeable solution that addresses the concerns of both sides.

In the meantime, investors and industry observers will be closely watching the developments in this regulatory dispute, as the outcome could have significant implications for the broader financial landscape and the role of large asset managers in the US banking sector.