07:33 AM EDT, 04/02/2024 (MT Newswires) -- BlackRock ( BLK ) , State Street (STT), and Vanguard face scrutiny from a regulator in Washington on concerns that the index fund giants are failing to abide by an agreement to be passive players at banks, The Wall Street Journal reported Tuesday.

The investment firms, which collectively manage more than $23 trillion in assets, hold stakes in banks larger than 10% without onerous regulatory obligations so long as they remain passive shareholders and refrain from attempting to influence board decisions, the report said.

Federal Deposit Insurance Corporation board member Jonathan McKernan told The Journal he wants to strengthen FDIC's monitoring of the firms and stop their investments in banks above the 10% threshold until the agency finishes an examination of their role.

"We need to be doing more to actually confirm that the Big Three are not leveraging their large stakes to exert influence over FDIC-regulated banks," the Republican appointee told The Journal.

BlackRock ( BLK ), State Street, and Vanguard did not immediately reply to MT Newswires' requests for comment.

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