UK: Watchdog seeks to boost competition in wholesale banking

Britain’s capital markets watchdog confirmed changes on Tuesday to how investment banks treat business customers, saying it will ban clauses that tie in clients and create a more open market for initial public share offers.

Banks will also be stopped from “misrepresenting” their performance in industry league tables to win new business.

The Financial Conduct Authority published its final report into competition in the investment and corporate banking market, confirming “remedies” outlined in an interim report in April.

“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,” Christopher Woolard, FCA director of strategy and competition, said in a statement.

“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 package of measures, some of which will be consulted on further, include a ban from early 2017 on clauses that restrict a bank’s customer from using another bank in future capital market transactions.

The watchdog will also crack down on 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.”

Full content: Reuters

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