On May 22, 2015, the FCA published the terms of reference for its upcoming market study into competition in investment and corporate banking. The need for the market study emerged during the FCA’s review of competition into the wholesale sector, the feedback statement for which was published in February this year. The aim of the market study is to assess whether competition for investment banking and corporate banking services is functioning well, focusing on primary market and related activities provided in the UK. Primary market activities cover equity capital markets, debt capital markets, mergers & acquisitions and acquisition financing. Related activities, such as corporate lending, corporate broking and advice, will be considered to the extent that they affect competition for primary market activities. The market study will concentrate on: (i) choice of banks and advisers, including the competitive landscape, clients’ purchasing behavior and entry and expansion within the sector; (ii) limited transparency, including the adequacy of information available to clients, transparency of the allocation process and the impact of established practices, processes or regulation on transparency in the IPO process; and (iii) bundling and cross-subsidization of investment and corporate and banking services, including whether there are any resulting adverse effects on competition and clients. The outcome of the market study may lead the FCA to adopt measures to promote effective competition such as making rules, publishing guidance or proposing further industry self-regulation. However, the FCA will be taking into account related initiatives such as the Fair and Effective Markets Review, the implementation of MiFID II and the Capital Markets Union, and may decide that no further action is required if any concerns arising from the market study are likely to be satisfied by upcoming legislative measures or otherwise. The FCA will be accepting comments on the terms of reference until June 22, 2015, although the regulator is not formally consulting on the terms. The FCA intends to publish an interim report, including any proposed remedies that may be necessary, by the end of the year and a final report in spring 2016.

The terms of reference are available at: http://www.fca.org.uk/static/documents/market-studies/ms15-1-1.pdf