FCA warns banks not to pressure their business customers

The Financial Conduct Authority (FCA) has today sent letters to the CEOs of all UK banks warning them against pressuring corporate borrowers to use them for other services as well, taking advantage of their customer’s vulnerable situation in the COVID-19 crisis. Particularly in light of firms needing to raise capital in these conditions.

The regulator said they would not hesitate to take enforcement action against banks they found to be involved in this practice. It said there were "credible reports" of a small number of banks failing to treat their corporate clients fairly when negotiating new or existing debt.

In the letter, the FCA said, “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,"

It refers to a practice where banks are literally just putting themselves forward for roles ‘in name only’ without doing anything to justify getting a slice of the fee pool.

“Tying clients to take additional services, or demanding fees for services not provided, is not in the best interests of those clients”, the FCA said.

The financial watchdog urged banks that were involved in both lending and equity markets to immediately review their controls to ensure that conflicts of interest were being handled correctly.

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