Blackrock has just launched a new financial institution called Hyperion Financial Management.
The new bank is expected to provide better service to clients, lower costs, and lower costs are just some of the promises the new company has made.
The move by Blackrock comes amid the ongoing battle between the US Federal Reserve and the Bank of England over the size of the bank’s $700 billion US reserve portfolio.
Blackrock is looking to raise $100 billion by 2020, and the announcement comes as US and UK regulators are trying to work out what the rules are for the Federal Reserve’s $20 trillion reserve portfolio, which has grown significantly since its inception.
A year ago, the Federal Bank of New York announced plans to build a new regional bank for the $70 billion reserve portfolio of the Federal Deposit Insurance Corporation (FDIC).
This was the largest single bank investment since the 2008 financial crisis, when the Federal reserve announced a $200 billion bank bailout program.
Hyperion is aiming to compete with the FDIC for the role of the regional bank.
Hyperion’s bank will be the first US bank to be owned by the Federal FDIC, but it is expected that other banks will be able to bid for the bank.
Blackrock CEO and co-founder Steve Jurvetson said the new bank will “focus on serving our clients in the best way possible, while maintaining a focus on long-term shareholder value.”
The new bank was announced on October 23, 2018, with a press release by BlackRock and Jurvetz stating: “Hyperion Financial will focus on providing a superior, cost-effective and secure banking experience that’s driven by our core philosophy of offering a low cost, high quality, and highly secure service to our clients.”
Jurvetsons remarks about the bank being focused on long term shareholder value came as a surprise to some.
While Blackrock says it plans to raise at least $100b, its shareholders are skeptical that the bank will raise much money, given that it has been plagued by low returns on capital and the increasing complexity of its business model.
“I’m not sure what this bank is going to do for them, or what they’ll be getting in return,” said Michael Apte, chief investment officer at BlackRock.
“They seem like a really nice company and they’re a really smart company to work for, but they’re going to be under pressure from regulators to do something for their shareholders.”
According to Blackrock’s SEC filing, it will be run by two new senior executives.
One of these will be Blackrock CEO Steve Jurveson, while the other will be a former Bank of America CEO who previously served as chairman of the FDIG.
BlackRock says it has “committed to retaining its chief investment officers for at least the next five years and to developing a management team to help manage the new venture.”
The bank is slated to launch in 2019.
BlackRock’s plans for Hyperion were also praised by the European Union, which is in talks with the bank to explore a merger.
“We’re very pleased to welcome Hyperion to our global portfolio and will continue to work closely with our European customers to help them meet their financial and operational needs,” said the European Commission’s Financial Market Supervisory Service (FFS).
The bank’s management, including Jurvettson, will be led by former Bank Of America executive John Reed, who was also in charge of the US banking industry.
Black Rock is looking for two people to be the new CEO of Hyperion, with the position to be filled by a director.