News Column

Watchdog review may lead to shake-up of bank system

July 10, 2014

A FINANCIAL watchdog is launching a broad "exploratory" review of competition in wholesale markets to check if they operate effectively to aid the economy and give institutional, corporate and government customers a good deal.

The Financial Conduct Authority (FCA) was set up just over a year ago as part of Britain's post-financial crisis shake up of supervision to protect consumers better and increase competition in markets.

Mary Starks, director of competition at the FCA, said the body launched a review of competition in the market for banking services that are provided between banks and other types of financial institutions, known as wholesale banking.

Ms Starks said it was an exploratory exercise to determine where competition may be weak and added: "And why is it important? Because wholesale financial markets play a crucial role in the economy, and the UK plays a key role in the international markets."

The review will cover markets, their infrastructure, asset management, and corporate and investment banking, but not credit rating agencies, payment systems and insurance.

While wholesale market players are typically more sophisticated than those in the retail sector, fines for banks that rigged the Libor interest rate benchmark showed that the impact of poor conduct in wholesale markets can be significant, according to Ms Starks. She said the FCA's remit to promote effective competition meant being proactive in rooting out competition issues rather than waiting for problems to occur.

One area the probe will look at is cross-selling and bundling of products and services.

The review will also look at potential conflicts of interest in providing investors with the best share price in the market, and the underwriting of equity and debt.

Barriers to entering or expanding a market will also feature in the review while incentives for asset managers to pay the correct price for the correct level of service, such as in relation to dealing commissions, will also be covered.


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Source: Herald, The (Scotland)


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