(31 July 2024 – United States) US banking regulators are considering a new rule that could restrict the influence of large investment managers on American banks’ governance and strategy.
The Federal Deposit Insurance Corporation (FDIC) approved a proposal on Tuesday that would impose new restrictions on passive investment funds before they can acquire significant stakes in publicly traded banks.
This move comes amid concerns from both Republicans and Democrats. Republicans fear index funds might push progressive agendas, while Democrats worry about concentrated investments affecting bank operations and raising antitrust issues.
The proposed rule, which is open for a 60-day comment period, could increase costs for major investment managers like Vanguard and BlackRock, and limit their ability to invest in banks. Critics argue it could harm banks’ access to capital and hinder efforts to generate returns for investors.
Currently, large asset managers have waivers that make them effectively exempt from a rule requiring approval before acquiring more than 10 percent of any single bank. Under the new proposal, these investors would need to pass an FDIC-administered test to prove they are not trying to influence bank management. Failure to pass would cap their ownership to 10 of any one bank.