The U.S. Federal Deposit Insurance Corporation (FDIC) has reached an agreement with Vanguard, a leading investment management firm, to strengthen the rules governing its investment activities in large U.S. financial institutions. The agreement aims to ensure that Vanguard, as a passive investor, does not influence the business decisions of FDIC-supervised banks.
Under the deal, Vanguard is prohibited from engaging in activities that influence the management or policies of institutions regulated by the FDIC, or their subsidiaries. The company has committed to regulators that it will not exert influence on the banks in which it has a stake, a practice known as “passivity agreements.”
The FDIC will monitor Vanguard’s investment activities, including any informal interactions the company has with the management of FDIC-regulated banks. The agreement is designed to address concerns about competitive risks and the concentration of power in a handful of institutional investors.
Vanguard has stated that the agreement is in accordance with its current practices, which prioritize passive investing and constructive engagement with policymakers. The company has long been committed to ensuring that passive investing means passive, and this agreement reflects that commitment.
The FDIC’s goal is to ensure that the largest asset management firms, including Vanguard and BlackRock, do not influence the business decisions of the biggest U.S. banks even when they acquire large stakes via indexed, or passive, investment funds. While a similar agreement has been reached with Vanguard, there was no disclosure of a similar agreement having been reached with BlackRock.
