The Federal Deposit Insurance Corporation and BlackRock Inc. BLK are heading toward a critical Jan. 10 deadline over new compliance measures affecting the asset manager’s holdings in U.S. banks, marking a significant development in the ongoing debate over institutional investor influence in the banking sector.
What Happened: The FDIC is pushing BlackRock, which manages $11.5 trillion in assets, to accept enhanced oversight requirements when it owns more than 10% of FDIC-supervised banks’ shares, the Financial Times reported, citing sources.
This move follows competitor Vanguard‘s recent agreement to broader FDIC oversight and expanded passivity agreements covering banks within larger holding companies.
BlackRock’s stakes in 39 U.S. community and regional banks exceed the 10% threshold, triggering regulatory concern. In an October comment letter, BlackRock strongly opposed the proposal, arguing it would “harm investors, disrupt the flow of capital to the economy, and undermine the efficacy” of existing regulations.
In its iShares U.S. Financial ETF IYF, BlackRock’s largest banking holdings are in JPMorgan Chase & Co, Bank of America Corp, and Wells Fargo & Company.
BlackRock and FDIC did not immediately respond to Benzinga's request for comment.
Why It Matters: The conflict reflects growing regulatory scrutiny of major asset managers’ influence over the financial sector. Harvard law professor John Coates, in his 2023 book “The Problem of Twelve,” warned about the unprecedented concentration of voting power, noting that major index funds together control over 20% of S&P 500 companies’ votes.
FDIC director Jonathan McKernan has emphasized the necessity of robust compliance measures, particularly as passive investment giants like BlackRock, Vanguard, and State Street Corp. continue to expand their holdings through index funds.
While BlackRock proposed alternative passivity agreements in December, these fell short of the compliance measures Vanguard accepted. The FDIC’s January deadline comes as the agency anticipates new leadership following the upcoming administration change.
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Image via Blackrock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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