BlackRock Shifts Advisory Focus to Bank Rules After Crisis

Feb 11, 2014 1:13 pm ET

(Updates with BlackRock’s relationships with banks in third paragraph.)

Feb. 11 (Bloomberg) -- BlackRock Inc., which advised governments during the financial crisis on hard-to-value assets, is now focusing more on helping banks comply with new regulations, said Gary Shedlin, the firm’s chief financial officer.

BlackRock’s financial markets advisory business, which was started in March 2008 and has helped Her Majesty’s Treasury to the Bank of Greece, has been a “lumpier” business than other units of the world’s largest asset manager, Shedlin said today at the 2014 Credit Suisse Financial Services Forum in Boca Raton, Florida. The business, part of BlackRock Solutions, has become steadier as it evolves into helping financial firms navigate the regulatory landscape rather than crisis management, he said.

BlackRock, with $4.3 trillion in assets, is one of the biggest clients and counterparties to the largest U.S. banks, as well as a competitor to their asset-management units. Unlike banks, BlackRock hasn’t been subject to many of the new rules because it invests client money, rather than its own capital, though regulators are evaluating whether the firm’s size poses risks to financial markets.

“There is huge driving change in the regulated environment,” Shedlin said. “There is a huge opportunity for us to basically play that role as an adviser.”

Risk Review

One regulatory hurdle BlackRock may have to overcome is whether it’s systemically important to financial markets. Large money managers are among non-bank financial companies that the Financial Stability Oversight Council is evaluating to determine whether they pose a risk to the financial system and thus require Federal Reserve oversight. A study of asset managers by the Treasury Department’s Office of Financial Research didn’t link the size of a money manager to risks posed by certain products and practices, BlackRock said in November.

Shedlin said today that BlackRock hasn’t received any updates on its status and still doesn’t know what the designation could mean for its business.

BlackRock Solutions has worked with the U.S. government, helping the New York Fed sell more than $70 billion of toxic debt assumed during the bailout of AIG Inc. and JPMorgan Chase & Co.’s takeover of Bear Stearns Cos. It’s also assisted governments in Ireland and Greece by evaluating their troubled banks.

The firm is the largest shareholder in companies from General Electric Co. to Apple Inc. along with banks such as JPMorgan and Bank of America Corp.

--Editors: Josh Friedman, Christian Baumgaertel