Why is the Financial Conduct Authority initiating another banking review?
The watchdog is concerned about the way investment banks bundle various services together and then sell them to corporate clients. It fears that new boys, who lack the clout to offer advice, share under-writing, derivatives and the rest, all at the same time, could be being disadvantaged by those that can.
So what can it do about this?
Fine those that it decides haven’t been playing fair, for starters. But more seriously, it can also refer the sector to the Competition & Markets Authority (CMA) which in turn can order firms to sell off bits and pieces of their businesses if it agrees that the banks are being anti-competitive.
So this could lead to a break-up?
It’s very early days to be talking about that. But the banking industry has just been handed another very big headache.
Presumably banks aren’t best pleased about this?
Furious doesn’t begin to describe it. This has come as a bolt out of the blue and, as you might expect, there are already warnings being made about the potential impact on the City. They also argue that investment banks are ferociously competitive so the whole thing is unnecessary.
Do they have a point?
Potentially. There is an awful lot going on in banking regulation at the moment. And there is only so much even a big, wealthy bank can deal with. On the other hand, you might very well think that they are only reaping what they have sown.