(Adds further details)
By Huw Jones
LONDON Oct 18 Britain's capital markets
watchdog confirmed changes on Tuesday to how investment banks
treat business customers, saying it will ban clauses that tie in
clients and create a more open market for initial public share
Banks will also be stopped from "misrepresenting" their
performance in industry league tables to win new business.
The Financial Conduct Authority (FCA) published its final
report into competition in the investment and corporate banking
market, confirming "remedies" outlined in an interim report in
"The universal banking model clearly works well for a wide
range of participants but areas such as the use of restrictive
contractual clauses, league table credibility and the allocation
of shares in IPOs are not always working as well as they could,"
Christopher Woolard, FCA director of strategy and competition,
said in a statement.
"This sends a signal that we expect firms to compete on the
merits, not by restricting clients' choice on future
transactions, drawing misleading comparisons with competitors'
performance, or exploiting conflicts of interest."
The package of measures, some of which will be consulted on
further, include a ban from early 2017 on clauses that restrict
a bank's customer from using another bank in future capital
The watchdog will also crack down on how banks "routinely
present league tables to clients in a way that inflates their
own position", suggesting that "some banks carry out loss-making
transactions purely to generate a higher position in such
It will work with the British Bankers' Association and the
Association for Financial Markets in Europe, two banking trade
bodies, to develop and adopt guidelines to improve how banks
present such information to customers.
The FCA will also revise preparations for listing a company
on the stock market, kicking off with a discussion paper on
Tuedsay ahead of formal consultation on specific reforms later
in the year.
Currently there is a "blackout period", meaning investment
research from a bank involved in listing a company is not
published until a prospectus is also published, usually at a
late stage in the IPO cycle.
This means that analysts at other banks don't have access to
the data needed to write their own report on the IPO.
"This leaves connected research as the only source of
information available to investors during a crucial stage of the
process," the FCA said.
In the discussion paper, the FCA said options for change
include publishing the prospectus seven days before any
connected research is published.
Giving access to all analysts to an issuer's management to
gather data directly could be another option, it said.
The FCA said it will consult on changes to the IPO process
later this year.
(Reporting by Huw Jones; Editing by Greg Mahlich)