FDIC Gives BlackRock New Deadline to Resolve Banking Oversight Questions

Asset manager BlackRock is reportedly facing a new deadline over its investments in government-backed banks.

The company had missed a Jan. 10 deadline issued by the Federal Deposit Insurance Corp. (FDIC) and now has until Feb. 10 to resolve an issue related to the firm’s oversight of its banking investments, Bloomberg News reported Sunday (Jan. 12), citing three sources familiar with the matter.

According to the report, BlackRock had pushed to hold off on talks until after the new administration takes office later this month.

Sources told Bloomberg the FDIC could open an investigation into BlackRock and seek more information from the company if it doesn’t make sufficient progress in resolving the issue. One of the sources said this could include a subpoena from the regulator and other “more compulsory actions,” the report said.

After BlackRock missed the Jan. 10 deadline, it asked for until March 31, saying it had just two weeks to review a proposed pact that could hurt its ability to serve clients. The FDIC denied that request while also making other requests tied to the company’s decision-making, and documents related to its bank holdings, sources told Bloomberg.

The report noted that BlackRock contends that the FDIC’s plans would harm index funds that dominate many of its investors’ portfolios and make it more expensive for banks to raise capital. The company also wants the FDIC to coordinate its new oversight with the Federal Reserve, which has its own passivity agreement with BlackRock.

PYMNTS has contacted BlackRock for comment but has not yet gotten a reply. FDIC declined to comment.

The news comes weeks after Rohit Chopra, member of the FDIC board of directors and director of the Consumer Financial Protection Bureau (CFPB), issued a statement praising measures by the FDIC to ensure fund managers such as BlackRock and Vanguard were not improperly influencing FDIC-supervised banks.

Both asset managers own stakes both in commercial enterprises and in banks and that these firms often characterize their involvement with these lenders as “passive.”

“However, we know that chief executive officers and board members of large companies carefully watch the policy pronouncements of these mega-owners,” Chopra said in a statement. “If these firms are not truly ‘passive,’ they may be in violation of longstanding statutes, including those relating to banking.”