Regulators warn banks against pressure tactics in debt raisings

LONDON (Reuters) – Banks advising companies taking on debt to recover from the pandemic must not use pressure tactics to win future business, global securities regulators said on Monday.

IOSCO, made up of financial market watchdogs from the United States, Germany, Britain, France, Japan and other financial centres, on Monday published updated guidance for regulators dealing with conflicts of interest in markets during debt raisings.

Many companies are having to raise debt and equity after suffering a loss of business due to pandemic lockdowns tipped economies into recession.

IOSCO said its members have raised concerns about certain banks putting pressure on their corporate clients to secure future business if the customers subsequently need to raise money via equity or debt.

“These banks are leveraging their lending relationship with issuers to pressure them into using the bank in a future capital raising where issuers may otherwise have not appointed them a role in a transaction,” IOSCO said.

One IOSCO member expressed concern that banks and other lenders behaving in this way might be acting opportunistically and not treating their clients fairly.

Britain’s Financial Conduct Authority, a member of IOSCO has already drawn attention to the issue.

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