The US Federal Deposit Insurance Corporation (FDIC) has paused a vote on a measure that would impose stricter oversight on the stakes asset managers can hold in banks.

While agreeing that asset managers holding big passive stakes in banks is an issue that necessitates more attention, the FDIC said that it wants to refine a pair of competing proposals that would give it more power to scrutinise asset managers given that neither had the majority backing of the board.

Speaking at the FDIC’s public board meeting on Thursday, board member Jonathan McKernan said: “If these fund complexes are using their purportedly passive investment funds to push social policy, to influence bank policy, there's a real significant issue here.”

Firms like BlackRock, Vanguard and State Street have been criticised by lawmakers for exerting influence on the management of companies in their portfolios and reducing competition despite being passive investors on paper.
The Investment Company Institute, which spent more than $5 million on lobbying efforts in 2023, has argued that the current status quo has proven itself and that “any suggestion that this regulatory approach should be changed lacks substantiation and could harm fund investors."

One of the proposed measures would direct FDIC staff to regularly assess if asset managers are complying with “passivity agreements” while the second seeks to remove an FDIC policy that requires the agency to defer to the Federal Reserve on matters related to passivity agreements involving bank holding companies.

Neither measure however has received broad support from the FDIC’s decision makers, with Michael Hsu, acting Comptroller of the Currency, arguing that "further research, analysis, and debate are clearly needed.”

He said that all three major US bank regulators – the FDIC, Federal Reserve Board (FRB), and the Securities and Exchange Commission (SEC) – should collaborate to engineer a consistent approach to policing bank control.

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