Bank discounts as City watchdog concludes investigation into COVID cash calls | Business Newsletter

City watchdog will not pursue coercive action against banks accused of unfairly raising pandemic rescue funds despite receiving “credible reports” of misconduct .

Sky News can reveal that the Financial Conduct Authority (FCA) has concluded an investigation – which spans almost two years – into the so-called binding of banks’ loan agreements to the explicit requirement that listed companies use them to provide other services.

City sources expressed surprise on Wednesday that the regulator had decided that no further action was needed despite anecdotal evidence from rival companies and investment banks. that this activity was rampant during the early part of the pandemic.

Some of the major lenders allegedly agreed to extend credit lines to listed customers only if they were authorized to help them raise equity.

When COVID-19 rolled out in the spring of 2020, the scores of quoted companies – including Compass Group, Foxtons, Informa, Restaurant Group and WH Smith – raced to prepare balance sheets by raising the limit. borrow and sell new shares to investors.

Billions of pounds have been raised from emergency cash calls to prevent a string of defaults and tens of thousands of people losing their jobs.

In a statement, a spokesperson for the FCA said: “We have concluded the work laid out in [Dear CEO] including follow-up with individual companies.

“If we receive any evidence of ongoing problems then we will not hesitate to take action.”

The letter is mentioned in the watchdog’s statement issued at the end of April 2020 to executives of major banks.

It said the FCA had “heard credible reports of a small number of banks not treating their corporate customers fairly when negotiating new or existing loans, as customers adjusted their financial current exception”.

“In particular, we have heard reports that banks may have used their lending relationship to put pressure on corporate clients to secure the role of equity mandates without otherwise the issuer will not assign them.

“In some cases, these roles may be ‘nominal only’, with little or no additional services offered in exchange for a portion of the fee pool.

“We are concerned that forcing customers to use additional services or asking to pay for services not provided is not in the best interests of those customers, distorts competition, makes undermine market confidence and question the integrity of companies and individuals.”

The FCA warned that such behavior “has the potential to increase overall transaction costs for businesses trying to raise money”.

Sky News revealed at the time that Numis, the independent broker, was among those who alerted the FCA to hints of negligence.

Among the investment banks that have appeared in some of the equity deals that management and rival bankers have expressed suspicion are Barclays, BNP Paribas and Santander.

Binding of services – where banks make the provision of a product, such as a credit, subject to acceptance by others through the conclusion of restrictive terms – has been banned by the FCA in 2017.

The FCA declined to say exactly when its work on the matter was completed, but rejected the suggestion that it had “dropped” the investigation.