FDIC scrutinises investment firms’ stakes in US banks: WSJ
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The news: The US Federal Deposit Insurance Corporation (FDIC) is examining whether investment firms like Vanguard, State Street and BlackRock are keeping to their passive-investing mandate in with respect to their large stakes in US banks.
The numbers: Vanguard, State Street and BlackRock currently control over 20% of the votes of the companies in the S&P 500, a greater share of US public companies than three investors have ever held previously. BlackRock and Vanguard each hold over 10% of shares at a number of US banks, which is typically the threshold that determines controlling interest in a lender.
The context: Regulators have exempt a number of asset managers from certain banking rules, including one which requires them to gain permission before acquiring shares above the 10% threshold, provided that the investment firm remains a passive investor.
Some FDIC board members are pushing to change this approach, with one member, Jonathan McKernan, telling the Wall Street Journal that he will press for an order to pause the firms’ investments in FDIC-regulated banks above the 10% threshold while the agency assesses the situation.
McKernan, a Republican, has developed a plan to improve FDIC monitoring of the firms which is expected to receive bipartisan support among the FDIC board when it goes to a vote in the coming weeks.
“We need to be doing more to actually confirm that the Big Three are not leveraging their large stakes to exert influence over FDIC-regulated banks,” McKernan told the Journal.
The source: Wall Street Journal
