BlackRock Inc., the world's largest asset manager, is seeking an extension on the deadline for reaching an agreement with the Federal Deposit Insurance Corporation (FDIC) regarding its investments in FDIC-regulated banking organizations. The current deadline is January 10, 2025, but BlackRock has requested an extension until March 31, 2025, according to a letter obtained by Reuters.

The request comes amid a months-long debate between the FDIC and major asset managers, including BlackRock and Vanguard Group Inc., over the rules governing their passive investments in FDIC-regulated banks. The FDIC has proposed new regulations that would require investors seeking to purchase at least 10% of a federally insured bank's stock to provide advance notice to the regulator. The FDIC would review a potential purchase even if the Federal Reserve had already approved it.

BlackRock, which manages over $7 trillion in assets, has opposed the FDIC's proposal, arguing that it would "harm investors, disrupt the flow of capital to the economy, and undermine the efficacy" of existing regulations. In its letter to the FDIC, BlackRock contended that the agency lacks the authority to finalize its rule and that it should instead work with the Federal Reserve to address any shortcomings in the existing review process.

The FDIC, however, maintains that its proposal is necessary to address concerns about the growing influence of large asset managers over banks. The agency has expressed concerns that investments from big asset managers are pushing banks to pursue riskier strategies to please investors. Republican board members have also raised concerns that investors could push banks to shun industries such as oil and gas producers.

The FDIC has sent letters to BlackRock and Vanguard seeking proof that they are acting as passive investors. The agency has also proposed new "passivity agreements" that would require these firms to notify the agency whenever their ownership crosses the 10% threshold, put new limits on their contacts with bank executives, and submit to independent reviews.



The debate over institutional investor influence in the banking sector has drawn attention from politicians on both sides of the political aisle. Republicans have raised concerns about money managers pushing progressive social or environmental causes, while Democrats have aired antitrust concerns about big funds that hold large stakes in multiple competing companies.

The outcome of the presidential election could also influence the FDIC's board composition and the fate of the proposal. Jonathan McKernan, the Republican FDIC board member who has been vocal about his concerns about index fund power, has said that the effort to step up scrutiny of Vanguard and BlackRock should continue.

In conclusion, BlackRock's request for an extension on the agreement with the FDIC highlights the ongoing debate surrounding institutional investor influence in the banking sector. The proposed regulations aim to address concerns about the growing power of large asset managers, but BlackRock and other industry groups have raised concerns about the potential impact on investors and the flow of capital to the economy. The outcome of this debate will have significant implications for both the financial sector and the broader economy.

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