April 23, 2024

The move could add to a host of troubles for asset managers, which have often been criticized for exerting undue influence on the management of their portfolio companies.


Banking regulators are probing if asset management giants BlackRock, Vanguard and State Street are sticking to their passive roles when it comes to investments in US banks, the Wall Street Journal reported on Tuesday.

 


Jonathan McKernan, a member of the Federal Deposit Insurance Corp’s (FDIC) board, is championing an order that would prevent fund managers from owning more than 10% stake in FDIC-regulated banks while it examines the matter, the report said.

 


McKernan and Rohit Chopra, another FDIC board member who is also the director of the Consumer Financial Protection Bureau, have jointly held meetings with BlackRock and Vanguard to discuss their holdings, the report said, citing people familiar with the matter.

 

The move could add to a host of troubles for asset managers, which have often been criticized for exerting undue influence on the management of their portfolio companies.


Lawmakers have also attacked such firms for allegedly prioritizing political motives over financial objectives.

 


BlackRock, for example, came under fire from Republicans over its use of environmental, social and governance factors in investing.

 


The company denied the allegations, citing the billions it has invested in energy companies. Its CEO Larry Fink said last year he had stopped using the term “ESG” because it had become too politicized.

 


BlackRock, Vanguard, State Street and FDIC did not immediately respond to Reuters requests for comment on the report outside regular business hours.

 


The big three asset managers are among the top shareholders at some of the biggest U.S. banks, including JPMorgan Chase , Bank of America, Wells Fargo and Citigroup.


So far this year, BlackRock’s shares have gained about 2%, while State Street dipped 0.3%, underperforming the benchmark S&P 500 index’s nearly 10% jump.

First Published: Apr 03 2024 | 12:00 AM IST