Investment banks escaped action to force down the fees they charge on Thursday when Britain's Office of Fair Trading left it up to fund-raising companies and their shareholders to kickstart competition. The Office of Fair Trading said that while the equity underwriting market lacked effective price competition, it was up to companies and institutional shareholders to drive greater competition.
"The OFT considers that concerns around the level of fees can be tackled most effectively and efficiently by companies and institutional shareholders rather than further intervention by the competition authorities," it said in a statement. Investment banks are under a broader spotlight over the size of bonuses they pay employees for their part in the reckless lending that precipitated the financial crisis.
The OFT, which launched an investigation into underwriting fees last June, said fees had been slow to come down from higher levels seen during stock market volatility in 2008 and early 2009. But it saw no need for competition authorities to intervene in the sector. "We have identified a number of options which would enable companies and institutional shareholders to drive greater competition for themselves, which we believe is the most effective and efficient way forward," said OFT Senior Director of Services and Public Markets, Sonya Branch. The OFT recommended companies look at awarding and agreeing fees for different aspects of the work at different times, perhaps using a range of banks to complete the various tasks in a share sale.
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