Three brokerages complain of "bullying" banks

LONDON (Reuters) - Three of London's best-known brokerages have accused the bailed-out banks of "bullying" debt-burdened corporate clients into using their investment banking services, skewing already tough competition.

The chief executives of Panmure Gordon (PMR.L), Numis Securities (NUM.L) and Evolution Securities (EVG.L) said in a joint letter to Paul Myners, the financial services minister, that the behaviour amounted to "corporate bullying".

The letter, seen by Reuters on Monday, does not name part-nationalised Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L), 43 percent state-owned, but takes aim at both.

"The behaviour of taxpayer-funded banks is stifling competition in the capital markets," the three said, adding independent players who were not bailed out by the taxpayer should not be placed "at a competitive disadvantage".

In the letter sent on Friday, the brokers said the banks should not make it a condition of lending that the company is forced to use the bank's in-house stockbroker.

"The government should ensure that state-backed banks can only win investment banking business on their merits rather than on the basis of taxpayer funded balance sheets and 'corporate bullying'," they said.

Encouraging corporate clients who take out loans to use a bank's investment banking services is, to a degree, part of regular business for all major banks. It is a key part of relationship banking and has been the driving force behind the acquisition of brokers by large banks.

For RBS in particular, it is also part of efforts to rebuild its battered investment banking business.

However, there has been growing concern in recent months over the degree of pressure on cash-strapped smaller businesses.