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May 19, 2010

Investment banking fees under scrutiny

by Gill Montia

Story link: Investment banking fees under scrutiny

The Independent has reported that the Institutional Shareholders’ Committee (ISC) is setting up an Institutional Investor Council, a new body that will investigate the fees charged by investment banks for underwriting rights issues and various advisory roles.

The ISC is a forum that allows the UK’s institutional shareholding community to exchange views and, on occasion, coordinate their activities in support of the interests of UK investors.

The Office of Fair Trading is also reported to be considering an investigation into the level of competition among banks that advise in mergers and acquisitions and underwrite share and bond issues.

In March, Vince Cable, now Business Secretary in the new coalition government, suggested that a “magic circle” of City firms have been stifling competition by shutting their rivals out of the biggest deals.

The Association of British Insurers has pledged its support to the yet to be established Institutional Investor Council, and says it looks forward to working closely with it.

The ISC’s announcement comes in the same week that Prudential published details of its record breaking £14.5 billion rights issue which, according to The Independent, will cost £680 million in fees to banks and other advisors.


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