FCA announces investigation into investment banking

19 February 2015

The Financial Conduct Authority (FCA) is to launch an investigation into the level of competition in the investment and corporate banking sector, the regulator has announced.

The study – the first of its kind – has been launched after a review by the FCA found "there was limited clarity over price and quality of services" that made it difficult for clients to work out if they are getting value of money; while concerns that "bundling and cross selling" of services are making it difficult for new companies and smaller, established firms to challenge the major players will also be looked into.

Following feedback from the industry, the FCA said there were "unanswered questions" regarding a lack of transparency and potential conflicts of interest in the sector which could be to the detriment of consumers. The full terms of reference for the investigation will be published in the spring.

Christopher Woolard, director of strategy and competition at the FCA, said: "We have chosen this particular area because the benefits of effective competition in the market could be significant. The UK is a global hub for investment banking, and this sector plays a crucial role in our economy, helping companies raise capital for investment, expansion and funding ongoing operations."

Close examination

Sue Lewis, chair of the Consumer Panel welcomed the move. She said: "The panel is pleased to see that the FCA has decided to examine the investment banking market more closely.

"We would also strongly urge it to undertake a market study into the asset management sector without delay: as the Panel's research has shown, opacity of costs and charges and conflicts of interest in this market have persisted for many years. This is bad for competition and, ultimately, to the detriment of retail investors."

However, deputy chief executive of the British Bankers' Association (BBA), Sally Scutt, said that "the market in London is one of the most competitive in the world."

"All banks will co-operate fully with this investigation, but we would urge the regulator to take into account the considerable and fast-moving changes that are currently taking place in wholesale markets," she added.


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