UK watchdog to be tougher on investment banks
(18 October 2016 – United Kingdom) Britain's capital markets watchdog, the Financial Conduct Authority (FCA), has announced changes to how investment banks treat business customers, indicating that it will ban clauses that tie in clients.
Additionally, lenders will be stopped from "misrepresenting" their performance in industry league tables to win new business.
The announcement is part of a final report into competition in the investment and corporate banking market, following "remedies" outlined in an interim report in April.
In a statement, FCA’s director of strategy and competition Christopher Woolard said: "The universal banking model clearly works well for a wide range of participants but areas such as the use of restrictive contractual clauses, league table credibility and the allocation of shares in IPOs are not always working as well as they could.
"This sends a signal that we expect firms to compete on the merits, not by restricting clients' choice on future transactions, drawing misleading comparisons with competitors' performance, or exploiting conflicts of interest."
The raft of measures will include a ban on the restriction of a bank's customer from using another lender in future capital market transactions.
The FCA will also more thoroughly scrutinise how banks "routinely present league tables to clients in a way that inflates their own position", suggesting that "some banks carry out loss-making transactions purely to generate a higher position in such tables."
The industry watchdog will work with the British Bankers' Association and the Association for Financial Markets in Europe, two banking trade bodies, to develop and adopt guidelines to improve how banks present such information to customers.
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