(Reuters) -The U.S. Federal Deposit Insurance Corporation (FDIC) said on Friday it has struck a passivity agreement with Vanguard, to help the regulator better monitor the money manager's interests in large banks.

According to the deal, Vanguard is strictly prohibited from engaging in activities that influence the management or policies of institutions regulated by the FDIC, or their subsidiaries.

Through "passivity agreements," investors commit to regulators that they will not exert influence on the banks in which they have a stake.

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

"Vanguard is built around passive investing and has long been committed to working constructively with policymakers to ensure that passive means passive," a Vanguard spokesperson said.

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