Vanguard reaches an agreement with the US banking regulator regarding controlling stakes in banks

(Reuters) – The U.S. Federal Deposit Insurance Corporation (FDIC) said on Friday it had entered into a negative agreement with Vanguard to help the regulator better monitor the interests of money managers at large banks.

According to the deal, Vanguard is strictly prohibited from engaging in activities that affect the management or policies of institutions regulated by the FDIC, or its affiliates.

Through “negative covenants,” investors commit to regulators that they will not exercise influence over the banks in which they have stakes.

The FDIC will now monitor Vanguard’s investment activities, especially any informal interactions Vanguard has with management of FDIC-regulated banks.

“Vanguard is built on passive investing and has long been committed to working constructively with policymakers to ensure passive investing means passive investing,” a Vanguard spokesperson said.

(Reporting by Prakhar Srivastava in Bengaluru; Editing by Shinjini Ganguly)