Myners demands inquiry into banks' underwriting fees

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The Independent Online

Lord Myners, the City minister, is urging the Office of Fair Trading to perform a "national service" by launching an investigation into the high fees charged by investment banks.

The minister wants the OFT to study the equity underwriting fees which investment banks charge the country's big institutional investors, but also the level of fees that corporate clients pay for merger and acquisitions and other advisory work.

The decision by the Institutional Shareholders Committee to launch its own inquiry should provide prima facie evidence that banks charge too much, and that the cost of entry to newcomers is high, he said.

"The OFT would be performing a national service if it launched a formal review into competition in investment banking to see if the banks do operate an oligopolistic cartel," he said. "Shareholders and companies are losing out. High fees, for underwriting and M&A, mean that companies are losing money which could go back to being paid in dividends."

The news that the ISC, made up of the City's most powerful trade bodies representing the country's big pension and insurance funds, is holding its own inquiry is a significant step forward in the controversy over fees. Until now, most of the City's big investors have criticised fees behind the scenes. Some have threatened to cut the banks out by creating their own underwriting club.

It is also a victory for Lord Myners, who has campaigned for an investigation for the past year as fees have soared. Many banks charge as much as 3.5 per cent for taking on underwriting risk, more than double the level before the crash. Many banks have argued that the more volatile markets mean they are taking on more risk.