Bank regulator gives BlackRock January deadline on bank stakes

By Suzanne McGee

(Reuters) – The U.S. Federal Deposit Insurance Corporation has told asset manager BlackRock (NYSE:) it has until Jan. 10 to accept an agreement that would allow the agency to step up scrutiny of its investments in FDIC-regulated banking institutions, according to a person familiar with the matter.

On Friday, the FDIC said it reached a similar deal with Vanguard strengthening the rules the asset manager must observe as a passive investor in FDIC-supervised banks, the latest step in a months-long tug-of-war between the banking regulator and the two biggest managers of index-based mutual funds and exchange-traded funds.

The FDIC is pushing both firms to adopt “passivity agreements,” which provide the regulator with more tools to monitor compliance on the part of the asset managers with pledges not to influence the business decisions of the FDIC-regulated banks in which they invest.

The individual familiar with the state of the negotiations between BlackRock and the FDIC said the firm received the regulator’s latest proposal on Friday, less than an hour after the announcement of the Vanguard agreement. That source said the wording of the proposed agreement is “substantively the same” as that of the Vanguard pact.

The FDIC declined to comment on the Vanguard agreement or the negotiations with BlackRock.

“We know that chief executive officers and board members of large companies carefully watch the policy pronouncements of these mega-owners,” said Rohit Chopra, director of the Consumer Financial Protection Bureau and a member of the FDIC board, in a statement released on Monday.

“If a large asset manager is truly passive as it claims, it should have no problem complying” with the kind of passivity agreement the FDIC is seeking, Chopra said.

In a public comment letter submitted to the FDIC in October, BlackRock said it already makes legally binding commitments to the Federal Reserve Board to remain a passive investor in U.S. banks.

“BlackRock does not exercise control over FDIC-supervised institutions, nor does it seek to,” Benjamin Tecmire, head of regulatory affairs, said in the letter.

The FDIC has not stated what consequences might follow if BlackRock does not meet the Jan. 10 deadline.