(Adds more detail)
LONDON, April 28 (Reuters) - Britain's markets watchdog said
on Tuesday it might take enforcement action against banks that
are putting pressure on their corporate borrowers during the
pandemic to buy other services as well.
The Financial Conduct Authority (FCA) said it had heard
"credible reports" of a small number of banks failing to treat
their corporate clients fairly when negotiating new or existing
debt.
"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 in a "Dear CEO"
letter to heads of banks.
In some cases the roles may be in "name only", with few or
no additional services being provided in exchange for a share of
the fee pool, the FCA said.
"We will be looking into this further, but want any practice
of this nature to cease immediately."
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.
With Britain facing a deep recession, many companies are
expected to tap equity markets to raise cash to stay afloat.
Banks involved in equity and lending markets should review
their controls to ensure that conflicts of interest are being
handled properly, the watchdog said.
"You should undertake this review having regard both to the
increased volumes we expect to see in equity capital markets,
and the concerns that have been raised with us to date," the FCA
said.
"We want to understand how you ensured your clients were
treated fairly, and inside information was handled
appropriately."
(Reporting by Huw Jones
Editing by Maiya Keidan, Kirsten Donovan)