The FDIC Board today tabled two resolutions concerning bank control after both failed to gain majority support, with their sponsors promising to bring them back at a later date following further refinement.
The first resolution by FDIC Director Jonathan McKernan would have required the agency to annually assess whether asset managers that manage large index funds control an FDIC-supervised bank. McKernan has been vocal about his concern that the “big three” asset managers—Vanguard, BlackRock and State Street—use their voting power at publicly traded banks to advance environmental, social and governance objectives and influence corporate policy at the banks. “If these fund complexes are using their purportedly passive index funds to push social policy [or] to influence bank policy, then there’s a real and significant issue here, and there’s one the FDIC needs to get ahead of before the influence of these fund complexes grows even larger,” he said.
The second resolution by CFPB Director Rohit Chopra, an ex officio FDIC board member, would have eliminated an exemption for FDIC review of an application for a change in control of a bank holding company if the Federal Reserve instead reviews it. The proposal had the support of FDIC Chair Martin Gruenberg. “I am not aware of another provision where, by rule, the FDIC defers to another agency on a matter affecting an FDIC-supervised institution,” Gruenberg said.
Both McKernan and Chopra withdrew their resolutions after it became clear that neither had majority support, with Acting Comptroller of the Currency Michael Hsu, an ex officio FDIC board member, saying he would vote against both. Hsu said that issues of bank ownership and control are shared across the FDIC, Fed and OCC, and therefore require interagency coordination. “In short, I believe we should work together to strengthen bank control assessments, instead of creating more processes and opportunities for turf battles or fragmentation,” Hsu said.
