Three of the City’s leading stockbrokers have written to Lord Myners, the City Minister, accusing Royal Bank of Scotland and Lloyds Banking Group of “corporate bullying” by forcing companies that owe money to the banks to use their investment banking services.

In an unprecedented act of solidarity, three of the Square Mile’s fiercest rivals — Tim Linacre, chief executive of Panmure Gordon; Oliver Hemsley, chief executive of Numis; and Alex Snow, chairman of Evolution — allege that when a company holds a rights issue to reorganise its debt, the banks will continue to lend to it only if it uses their brokerage and capital markets units for the deal.

“It is becoming increasingly apparent that anti-competitive behaviour is arising in UK investment banking,” they write in a letter seen by The Times. “Taxpayer-supported banks are requiring indebted corporate clients to use their corporate finance and equity capital market services as a pre-condition for continuing their lending support.”

They go on to argue that the banks are stifling competition in the capital markets, placing themselves and other brokers at a competitive disadvantage and damaging London’s reputation as a leading international financial centre. “The Government should ensure that state-backed banks can only win investment banking business on their merits rather than on the basis of taxpayer-funded balance sheets and corporate bullying.”

Their claims are supported in a separate letter obtained by The Times from one of the banks to a company that recently held a rights issue, in which the lender clearly outlines the role it wants to play in the equity-raising process, including securing 40 per cent of the total underwriting. The latest example of the lenders strong-arming their way into a fundraising is thought to have been Grainger’s £250 million rights issue last week, where one of the property group’s normal brokers was not involved, but RBS’s Hoare Govett and Lloyds were.

Mr Linacre said: “Companies that are raising equity finance should be free to choose the advisers they wish, not to have them forced on them by their bank lender. Lord Myners has shown himself to be a champion of fair competition. I am sure he will now look at this issue.”

Mr Hemsley said the issue was commonplace. RBS declined to comment and Lloyds could not be contacted.

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