FDIC Sets New Deadline for BlackRock to Address Oversight Concerns
The Federal Deposit Insurance Corporation (FDIC) has given BlackRock, the world’s largest asset manager, a fresh deadline of February 10 to resolve an issue regarding oversight into its investments in FDIC-regulated banking organizations. This move comes after BlackRock failed to meet a previous January 10 deadline, according to sources familiar with the matter.
What’s at Stake
If BlackRock fails to make sufficient progress toward resolving the issues, the FDIC may launch an investigation into the company and demand more information. The agency’s concerns center around the asset manager’s passive investments in FDIC-regulated banks, which have raised questions about the level of oversight required.
A Months-Long Dispute
The dispute between the FDIC and BlackRock is part of a larger debate over the rules governing passive investments in banks. In late December, Vanguard Investments reached an agreement with the FDIC, paving the way for similar agreements with other asset managers. BlackRock, however, has been pushing for an extension to March 31 to reach an agreement on oversight.
The Rise of Index Funds
The significance of this dispute cannot be overstated. BlackRock, Vanguard, and State Street collectively control a staggering $26 trillion in assets, making them the largest owners of many large U.S. corporations. The popularity of low-cost index funds has fueled their growth since the 2009 financial crisis, raising questions about their influence on the market.
Next Steps
As the deadline looms, all eyes will be on BlackRock to see if it can resolve the oversight issues to the FDIC’s satisfaction. Failure to do so could lead to a lengthy and costly investigation, with far-reaching implications for the asset management industry.
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