Practice of Reciprocity Among Major European Banks Draws Scrutiny

By Evan Abrams

European and American banks frequently give business to other financial institutions as a reward for referring business to bank or an inducement to do so in the future. To some this is smart business practice but to others it seems highly anticompetitive.  According to the Wall Street Journal, the U.K. Financial Conduct Authority has launched an investigation into competitiveness among financial institutions, including the practice of reciprocity. Reciprocity may also hurt shareholders by inflating the number of banks working on any one project.