This policy statement sets out our rules to ban contractual clauses that restrict competition without being clearly beneficial to clients.
Our market study into investment and corporate banking covered a wide range of primary market issues and it assessed the effects of cross-selling and cross-subsidisation. We found that primary market providers generally use a ’universal banking’ model, which involves the cross-selling and cross-subsidisation of services.
While many primary market clients, particularly large corporates, feel this model works well, we found that some practices could hinder competition, especially for smaller clients. In particular, banks use clauses in contracts, mandates or engagement letters that oblige clients to award or offer future primary market services to that bank. We found that these clauses can restrict a client’s choice in future transactions. We considered a range of interventions and proposed that these restrictive contractual clauses should be prohibited where they relate to future primary market services.
In October 2016 we published CP16/31 Investment and corporate banking: prohibition of restrictive contractual clauses (PDF) seeking views on proposed amendments to our rules in relation to the proposed ban on restrictive clauses.
This Policy Statement sets out our response to the feedback received to CP16/31 and sets out our final rules.
The ban will affect firms that provide primary market services and clients of these firms.
Firms affected by these changes will need to ensure compliance from 3 January 2018.