UPDATE 1-EU considers tightening law after inquiry into BlackRock contract

(Updates with lawmaker comment, BlackRock no comment)

By Kate Abnett

BRUSSELS, April 19 (Reuters) - The European Commission has said it will consider forcing companies to disclose conflicting interests when they bid for EU-funded contracts, following an inquiry into its appointment of a division of BlackRock to help develop green banking rules.

The European Union watchdog rapped the Commission in November for appointing the Financial Markets Advisory (FMA) unit of BlackRock, the world’s largest asset manager, to produce a study that would inform EU plans to integrate sustainability into banking prudential rules.

European Ombudsman Emily O'Reilly did not ask the Commission to cancel the contract, but said it should have better scrutinised BlackRock's motivation in bidding, its pricing strategy and its own measures to prevent conflicts of interest.

In a response published on Monday, the Commission said it will consider proposing amendments to EU law to require companies and organisations to disclose conflicting interests when they bid for EU-funded contracts.

It will also consider providing further guidance to assist staff dealing with public procurement.

"The Commission is reflecting on possible clarifications relevant to the procedure to follow when a professional conflicting interest may be at stake in a procurement procedure," it said.

The Ombudsman welcomed the EU executive's response, which it said reflected its own suggestions. The Ombudsman will monitor the proposed changes, it said.

BlackRock declined to comment.

Damien Careme, one of the EU lawmakers who complained to the Ombudsman over the BlackRock contract, said the Commission should go further and exclude companies from tenders if the interests of their projects, or those of their clients, conflict with that of the field concerned by the tender.

"This is common sense," Careme said.

BlackRock beat eight other bidders with its offer of 280,000 euros - roughly half the EU contract’s estimated value. The asset manager said it would ensure "physical segregation" of FMA to ensure information did not flow to other parts of its business.

The Commission is due to propose an update to EU financial regulation by the end of the year. (Reporting by Kate Abnett Editing by Paul Simao and Bill Berkrot)