BlackRock Stares Down FDIC Just Before Deadline Over Bank Stakes

New York: So, BlackRock is in a bit of a standoff with the FDIC. They’re not too keen on the agency’s demands for more oversight on their bank stakes. The deadline is looming, and BlackRock is asking for an extension until March 31. They say they need more time to look over the proposed agreement.

In a letter, BlackRock’s regulatory affairs head, Ben Tecmire, pointed out that they don’t see any urgent issues that would require rushing into a new regulatory setup. They already have a similar agreement with the Federal Reserve, so they’re pushing back on the FDIC’s plans.

Over the past year, BlackRock has been vocal against the FDIC’s efforts to keep big asset managers from having too much sway over banks. They argue that these new rules could mess with index funds, which many investors rely on, and make it tougher for banks to raise capital.

Interestingly, the FDIC has been under pressure from board members to tighten oversight on these big players. They’re worried that firms like BlackRock could have too much influence over bank management and strategy.

BlackRock’s situation is similar to what Vanguard went through last December when they signed a “passivity agreement.” This new agreement would require more audits to ensure they’re not trying to influence bank management, which is a bigger deal than what Vanguard had to deal with.

Despite the push for more oversight, BlackRock and industry groups believe the current regulations are enough. They think the FDIC should work with the Fed on any new rules since they already have agreements in place.

As of late September, BlackRock was managing nearly $7.8 trillion in funds. They, along with Vanguard and State Street, are among the top shareholders in many US companies, including banks. Some lawmakers are worried about the influence these firms have, but BlackRock insists they usually support company management.

In October, BlackRock even asked the FDIC to drop a proposed rule on asset managers’ stakes in banks, claiming it could create significant risks and complicate how index funds operate.