Banks defend fees as OFT slams equity underwriting
THE OFFICE of Fair Trading (OFT) strongly criticised the UK’s equity underwriting market for a lack of competition yesterday, but stopped short of referring it to the Competition Commission as banking bodies defended the industry.
The OFT urged companies and institutional shareholders to pressure firms to barter for equity underwriting fees, after it found prices have failed to fall to reflect market conditions. Underwriting fees in the UK reached a record £1.6bn in 2009, though the total dropped to £400m in 2010, according to figures from Thomson Reuters. This suggests fees rates of 2.3 per cent. The Association for Financial Markets in Europe said while it backed calls for greater transparency, “[d]ecisions on matters that can be vital to a company’s future are rarely made solely on price”.