Ensure Investment Managers Do Not Influence Banks

Recent steps taken by Federal Deposit Insurance Corporation (FDIC) will help ensure that fund managers do not “improperly influence” decisions made by FDIC-supervised banks, Rohit Chopramember of the FDIC board of directors and director of Consumer Financial Protection Bureau (CFPB) said on Monday (Dec. 30) statement.

Chopra said in the statement that investment managers are very keen BlackRock and Vanguard own stakes in commercial enterprises and in banks and that these companies often characterize their involvement in these companies as “passive.”

“However, we know that chief executive officers and board members of large companies are watching the policy statements of these mega-owners carefully,” Chopra said. “If these companies are not truly ‘passive,’ they may be violating longstanding laws, including those related to banking.”

Chopra’s statement came after Friday’s (Dec. 27) release of a revised advisory opinion through the FDIC, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board of Governorswhich states that large “passive” asset managers may not have a representative on the board of directors of a bank in which they have a significant ownership stake.

In addition, the FDIC said Friday that it entered a investor passivity agreement with Vanguard where the agency has advanced tools to ensure that the company remains passive in terms of stake ownership in FDIC-insured banks.

Reached by PYMNTS, Vanguard said in an emailed statement that the deal is part of its ongoing commitment to passive investing.

“Vanguard was built around passive investing and has long been committed to working closely with policymakers to ensure that passive means passive,” the statement said. “This agreement with the FDIC is another example and recognition of that ongoing commitment.”

BlackRock did not immediately respond to PYMNTS’ request for comment.

In his Monday statement, Chopra said the steps taken by the FDIC are “small, but significant” and advance the goal of ensuring that fund managers do not “improperly influence” FDIC-supervised funds. bank.

“Government-wide agencies tasked with protecting critical sectors of the economy from conflicts of interest and anticompetitive behavior should take more steps in relation to major investment managers,” Chopra said.