FCA warns banks not to pressure corporate clients amid coronavirus
The City watchdog today warned banks not to put pressure on their corporate clients to cut them into business in return for coronavirus loans.
The Financial Conduct Authority (FCA) wrote to lenders to say it had heard “credible reports of a small number of banks failing to treat their corporate clients fairly” while negotiating coronavirus loans.
It continued: “In particular, we have heard reports that banks may have used their lending relationship to exert pressure on corporate clients to secure roles on equity mandates that the issuer would not otherwise appoint them to.”
The FCA said that some of these roles may be “in name only” with little or no work done in exchange for fees.
“We will be looking into this further, but want any practice of this nature to cease immediately,” the watchdog said.
The firm slap on the wrist comes as the spotlight is on banks, with customers and policymakers keen to ensure they do their bit to keep lending during the coronavirus slowdown.
Bank of England governor Andrew Bailey has repeatedly encouraged them to increase loans to troubled businesses, telling them to “put their back into” it.
The FCA said today that it is “concerned that tying clients to take additional services, or demanding fees for services not provided is not in the best interests of those clients, distorts competition, undermines market confidence and calls into question firms’ and individuals’ integrity”.
It added: “If we find further evidence to support these concerns, we will not hesitate to take action, as this conduct has no place in well-functioning markets.”