May 18, 2020

Banks probe sales push linked to corporate loans

Banks in the UK are investigating whether they pressured corporate clients into giving them extra business in return for loans, after the country's financial watchdog warned against the practice during the coronavirus pandemic. Banks will often lend to longstanding clients on favourable or even lossmaking terms in the hope of winning more profitable business in the future, such as underwriting share issues, advising on mergers and acquisitions, or selling bespoke derivatives products such as swaps. Sky News reported that one institutional investor said banks including Barclays had been "Invisible" on a £64m equity raising for DFS, a furniture retailer, despite getting credit for the deal. "It is frustrating that as one of the banks still lending and trying to support vulnerable UK customers, we are unfairly accused by competitors of this behaviour," said a person at one of the banks conducting an investigation. A person familiar with its operations said it was "Entirely feasible" some banks would want to conduct their own internal reviews, adding that the FCA "Would follow up as [it] said in the letter . . . and as you would expect."

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