The Financial Conduct Authority has warned some banks are exerting unfair pressure on businesses looking to secure debt financing amid the coronavirus pandemic.
The regulator fired shots in a Dear CEO letter to bank bosses yesterday (April 28) in which it said it had "credible reports" of a small number of banks failing to treat companies fairly when negotiating new or existing debt facilities.
In particular the watchdog said it knew of some banks which used their position to "exert pressure" on corporate clients and secure roles on equity mandates which they would not otherwise be appointed to.
The FCA said: "In some cases, these roles may be ‘in name only’, with few or no additional services being provided in exchange for a share of the fee pool.
"We will be looking into this further, but want any practice of this nature to cease immediately."
The FCA threatened further action to protect companies as they navigate the "current exceptional circumstances" and said it would contact bank bosses to investigate the issue further.
If banks encouraged companies to take additional services or demanded fees for services not provided as part of an equity raising this would increase the overall costs for corporate clients to raise money, the regulator warned.
The FCA said: "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.
"If your firm is active in both equity and lending markets we ask that you review your current systems and controls to satisfy yourself that they are appropriate for ensuring the proper treatment of clients, the identification and mitigation of conflicts of interest, and the handling of inside information."
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