(Reuters) – The Federal Deposit Insurance Corp. has reached an agreement with Vanguard that tightens rules that allow the investment management giant to take large stakes in large U.S. financial institutions, according to an agreement announced on Friday. The content was as follows.
The agreement strengthens the FDIC’s ability to monitor Vanguard’s investment activities and clarifies what banks supervised by the FDIC are allowed to do as passive investors. The goal is for the largest asset managers, including Vanguard and BlackRock, to influence the business decisions of America’s largest banks, even if they acquire large stakes through index-tracking or passive investment funds. The goal was to avoid giving.
In a press release announcing the agreement with Vanguard, FDIC Director Jonathan McKernan said academic commentators have raised concerns about the competitive risks of concentrated ownership and power in the hands of a small number of institutional investors. He said he has expressed his concerns.
McKernan said the agreement should allow banking regulators to address those concerns.
According to the agreement, Vanguard is strictly prohibited from engaging in any activity that would influence the management or policies of any agency regulated by the FDIC or its subsidiaries. Vanguard said this is in accordance with current practice.
A Vanguard spokesperson said: “Vanguard is built around passive investing and has long been committed to working constructively with policymakers to ensure that passive means passive.”
Through “passivity agreements,” investors promise regulators not to influence the banks in which they invest.
The FDIC monitors Vanguard’s investment activities, particularly Vanguard’s informal interactions with FDIC-regulated bank management.
No information has been disclosed that a similar agreement has been reached with BlackRock. BlackRock could not be reached for comment. The FDIC did not immediately respond to a request for further comment.
(Reporting by Prakhar Srivastava and Suzanne McGee in Bengaluru; Editing by Shingini Ganguli and Megan Davies)
