By Pete Schroeder

(Reuters) -A prime U.S. banking regulator is contemplating a plan to make sure asset administration giants BlackRock (NYSE:), Vanguard and State Road (NYSE:) stick with their passive roles in relation to investments in U.S. banks, a senior regulatory official stated on Tuesday.

Jonathan McKernan, a board member of the Federal Deposit Insurance coverage Corp (FDIC), is championing an order that may direct FDIC employees to repeatedly look at massive asset managers who personal a stake of greater than 10% in FDIC-regulated banks to make sure they don’t seem to be improperly influencing their operations.

McKernan instructed Reuters he plans to carry such an order up on the FDIC’s April board assembly. A spokesperson for FDIC Chairman Martin Gruenberg referred questions on the matter to McKernan and declined to remark additional.

The trouble to extra intently police asset managers with sizeable financial institution investments was first reported by the Wall Road Journal.

McKernan and Rohit Chopra, one other FDIC board member who can be director of the Shopper Monetary Safety Bureau, have collectively held conferences with BlackRock and Vanguard to debate their holdings, in line with a regulatory official accustomed to the matter.

Presently, asset managers function beneath so-called “passivity commitments,” vowing to chorus from sure influential actions in banks the place they maintain massive investments in trade for much less onerous regulatory oversight than would sometimes accompany a celebration with a big financial institution stake.

In a January speech, McKernan argued regulators ought to do extra to make sure companies are upholding these commitments, as they primarily depend on companies to self-certify.

The monetary trade opposes the trouble so as to add extra regulatory oversight.

“We see no cause to institute duplicative laws on passive investments in banking organizations with out much more justification and proof that these investments are in truth harming banks and their depositors,” stated Lindsey Keljo, a managing director with the Securities Trade and Monetary Markets Affiliation.

Asset managers have typically been criticized for exerting undue affect on the administration of their portfolio corporations. Lawmakers have additionally accused such companies of prioritizing political motives over monetary targets. BlackRock, for instance, got here beneath hearth from Republicans over its use of environmental, social and governance (ESG) elements in investing.

The corporate denied the allegations, citing the billions it has invested in vitality corporations. Its CEO Larry Fink stated final yr he had stopped utilizing the time period “ESG” as a result of it had turn out to be too politicized.

Vanguard stated in an announcement: “We sit up for persevering with our constructive dialogue with the FDIC to reply questions on Vanguard’s confirmed, long-term funding method.”

BlackRock declined remark. State Road didn’t reply to Reuters requests for remark.

The massive three asset managers are among the many prime shareholders at a number of the largest U.S. banks, together with JPMorgan Chase (NYSE:), Financial institution of America, Wells Fargo and Citigroup.

To this point this yr, BlackRock’s shares have gained about 2%, whereas State Road dipped 0.3%, underperforming the benchmark ‘s almost 10% leap.