BlackRock Throws Support Behind Controversial Financial Watchdog

Amid calls to restructure or shutter the U.K.’s Financial Reporting Council, the world’s largest asset manager, BlackRock, is throwing its weight behind the watchdog.

Reports in the Financial Times on Tuesday (October 9) said BlackRock wants more authority handed to the FRC, garnering dramatic reactions from FRC opponents.

Former chairman of the European Parliament Economic and Monetary Affairs Committee Baroness Sharon Bowles, for instance, said she would divest her BlackRock funds “in disgust.”

“Frankly it is rather head in the sand,” she said. “They have gone down a long way in my estimation.”

BlackRock manages $6 trillion in assets and, according to the FT, “has considerable clout with policymakers.” In a statement responding to the government’s review of the watchdog, BlackRock said there should be no “wholesale changes” to the FRC.

The review, headed by Legal & General Chairman John Kingman, has garnered reactions from other industry stakeholders including academics, auditors and investors, many of whom want a breakup of the FRC or an abolition of the body altogether.

In August the Institute of Directors called for a breakup of the FRC following the collapse of major government contractor Carillion, which some critics argue showcased the FRC’s inability to identify and mitigate Carillion’s accounting failures.

The structure of the Financial Reporting Council is “not conducive to the differing regulatory approaches needed for governance and stewardship on the one hand, and statutory audit on the other,” the IoD said, calling for the body to be split into separate units.

But according to BlackRock, the FRC ensures “a strong flow of investments into U.K. companies,” a statement that the U.K. Shareholders Association described as “grandiose to the point of absurdity.”

“The FRC is not able to ensure a strong flow of investment into U.K. companies,” the Association said. “It might be able to contribute to this outcome but there are many other factors that will determine its achievement and many other agencies which also need to be involved. Few, if any, are under the control of the FRC.”