BlackRock leads opposition to new US limits on bank ownership

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BlackRock is launching a full-scale counterattack against a regulatory effort to limit the influence of big money managers over U.S. banks, saying it would raise costs for investors and disrupt the flow of capital to the economy.

The Federal Deposit Insurance Corporation has introduced a proposal that would require investors, including passive investment funds, to seek its approval when taking a stake of 10 percent or more in a significantly expanded group of banks, including hundreds of banks traditionally supervised by the United States. Federal Reserve or other regulators.

At the same time, the FDIC separately contacted BlackRock and Vanguard, the two largest index fund managers, to impose tighter restrictions on their behavior as large investors in the group of small, publicly traded banks it oversees. Already.

BlackRock strongly opposes the proposal, which would harm investors, disrupt the flow of capital to the economy and undermine the effectiveness of the existing regulatory framework, the $11.5 billion asset manager wrote in a public comment letter filed Thursday.

This two-pronged oversight effort has industry executives talking privately about an FDIC land grab and publicly warning that the new rules will make investments less attractive to banks and could destabilize smaller regional lenders.

Politicians on both sides of the political aisle have voiced their concerns. Republicans worry that fund managers won't champion progressive social or environmental causes, while Democrats have expressed antitrust concerns about large funds that hold significant stakes in multiple competing companies.

The FDIC has set an October 31 deadline for BlackRock and Vanguard to sign new passivity agreements that would require them to notify the agency each time they cross the 10% threshold, impose new limits on their contacts with bank executives and to submit to independent reviews.

BlackRocks' letter indicated that this process was premature. The FDIC applies [new restrictions] to some companies as a fait accompli before considering comments on the proposal, he said, adding that the approach lacked transparency and applied inconsistent standards among companies without clear justification.

Because of its large index funds, BlackRock owns more than 10 percent of the shares of 39 FDIC-supervised banks and many others that would be affected by the proposed expansion. The fund manager declined to comment beyond its letter.

Vanguard said: “We have engaged with policymakers and suggested additional reforms that further clarify and refine expectations for passivity. We continue to work constructively with policymakers, including the FDIC.

The U.S. Chamber of Commerce called the proposed rule flawed and unsupported by data, while the Conference of State Bank Supervisors said it would lead to duplicate reviews.

The Investment Company Institute, a lobbying group, warned that the proposal was a drastic and unjustified departure that would impose significant costs and burdens on regulated funds and their investors.

He also said renegotiation efforts introduce uncertainty and create unnecessary obstacles for funds seeking to make passive investments in banking organizations.

The regulator defended its approach. The FDIC has an interest when entities seek to directly or indirectly control institutions supervised by the FDIC, it says.

The fate of the broader proposals could depend on the presidential election, because the winner could shift the balance of power on the FDIC board.

But Republican FDIC board member Jonathan McKernan, who has raised concerns about the power of index funds, said efforts to strengthen control of Vanguard and BlackRock should continue. The two issues are distinct, although perhaps thematically related, he said. We should not wait to fill an obvious gap in our monitoring framework.

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