The FDIC is requesting BlackRock to sign a “passivity” agreement, aimed at maintaining passive ownership of FDIC-supervised banks. Currently, BlackRock only has a similar agreement with the Federal Reserve but now faces a call for one from the FDIC as well. In July, FDIC board member Rohit Chopra criticized the lack of oversight on passive asset manager stakes, labeling it as “highly inappropriate.” Chopra emphasized the critical nature of certain sectors in the economy and the need for stringent oversight.
Benjamin Tecmire, BlackRock’s head of regulatory affairs, argued that increased oversight by the FDIC would duplicate efforts already undertaken by the Federal Reserve. He expressed concerns that such replication could hinder investment in banks, impacting investors and impeding capital flow. BlackRock’s engagement with numerous banks over the past three years was highlighted, with emphasis on the banks initiating most interactions.
Failure to agree to heightened scrutiny by Jan. 10 could lead to further actions by the FDIC, including the issuance of inquiries or subpoenas for additional information. The situation’s handling post-Inauguration Day on Jan. 20 remains uncertain. Jonathan McKernan, an FDIC board member appointed by Biden, lauded the recent agreement signed with Vanguard as a positive step. Concerns surrounding the oversight of index fund complexes have been raised in light of their rapid growth.
