FCA Could Open Competition Investigation to Include Custody Services, says NAPF

The National Association of Pension Funds (NAPF) has argued the Financial Conduct Authority’s (FCA) investigation into competition in the investment and corporate banking sector could be extended to include custodial services.

This follows the publication of an FCA review into competition in the wholesale sector, which found there was limited transparency over price and quality of services.

According to NAPF, issues over competition could include custody as it argues there are significant barriers to entry and increasingly narrow range of providers.

“Presently pension funds receive many ancillary services from a narrow pool of providers commonly bundled in with core custody services. This means it is often difficult for funds to assess whether value for money is being achieved,” says Will Pomroy, policy lead corporate governance, NAPF.

“What is clear is that there is limited innovation and often insufficient focus on client needs in this sector, and to that end we welcome the FCA’s signal that it may take a closer interest in the competitive dynamics in this market.”

Furthermore, the FCA may expand its investigations into other areas including asset management, vertical integration of clearing and execution services, the impact of a reduction in the number of clearing members, and a lack of client clearing for over-the-counter (OTC) derivatives.

“What was clear from the discussions we had with stakeholders and firms was that there are unanswered questions about potential conflicts of interest and value for money in this market,” says Christopher Woolard, director of strategy and competition, FCA.

“This will form part of our wider work in the wholesale markets, alongside the Fair and Effective Markets Review.”