UK regulator the Financial Conduct Authority (FCA) has launched a review of the wholesale financial markets to determine whether competition is being distorted by conflicts of interest, information asymmetries and other issues.
The review, which aims to identify areas for further study over the next three months, will look at investment banking, asset management, corporate banking and markets and market infrastructure to see ‘where competition might not be working effectively,’ the FCA says.
‘The FCA is interested in features of a market or behavior that could inhibit or distort competition in the market,’ the regulator says in one of a series of press releases related to the review. ‘These include examples of potential barriers to entry or expansion, information asymmetries, conflicts of interest and cross-selling or bundling of services.’
The regulator says it will hold a series of roundtable discussions and meet with various market participants over the next three months and is requesting written input until October 9. It says it will also work with the government’s Fair and Effective Financial Markets Review, a joint review from the Bank of England, HM Treasury and the FCA, to spot any areas of the two reviews that overlap.
‘It is vital that wholesale financial markets are efficient, fair and competitive,’ says Christopher Woolard, director of policy, risk and research at the FCA. ‘Effective competition within the wholesale sector can lead to an increase in institutional efficiency, lower prices, greater innovation and can improve the quality and range of financial services provided.’
The FCA says it will consider the input in deciding which areas, if any, merit further in-depth market study.
‘It is also important to point out that our aim is not to protect every competitor,’ said Mary Starks, the FCA’s director of competition, in a speech announcing the review to the Chartered Institute of Securities.
‘We don’t, and won’t – because inefficient firms should be allowed to exit the market. But we do want to protect existing or potential competitors from anti-competitive practices by established firms with strong market positions.’
