BlackRock has been reportedly given until 10 February to address concerns from the Federal Deposit Insurance Corporation (FDIC) regarding its investments in FDIC-regulated banks, reported Bloomberg.
This follows the asset manager’s failure to meet an initial 10 January deadline and its unsuccessful request to extend discussions until 31 March.
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It is part of the FDIC’s initiative to enhance oversight of major investors in small and midsized banks, building on a similar arrangement with Vanguard.
Sources indicate that the FDIC may launch an investigation into BlackRock and request further information if the firm fails to show adequate progress.
This could lead to the issuance of a subpoena and further compulsory actions, they added.
Both BlackRock and the FDIC have declined to comment on the situation, which has escalated following the missed January deadline.
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By GlobalDataBlackRock had previously sent a letter to the FDIC on 9 January, requesting an extension, reported Reuters.
According to Bloomberg’s report, the FDIC’s response, which denied the extension, also requested additional details about BlackRock’s decision-making procedures and documentation regarding its bank.
BlackRock has expressed concerns that increased scrutiny could disrupt index funds and make it more expensive for banks to raise capital.
The firm also believes that the FDIC should work in conjunction with the Federal Reserve, which already has a passivity agreement with BlackRock.
FDIC board members, including a Republican Jonathan McKernan, a Democrat and the Director of the Consumer Financial Protection Bureau Rohit Chopra, have advocated for oversight of large asset managers.
They argue that the size and concentrated ownership of these firms could potentially influence the management and strategies of US banks disproportionately.
The compliance dispute impacts 39 US community and regional banks, where BlackRock owns more than 10% of each.
