Lord Myners demands review of investment bank charges

by Gill Montia

Story link: Lord Myners demands review of investment bank charges

Financial Services Secretary, Lord Myners, is challenging the level of fees charged by investment banks for their services, and has threatened government action if fees for underwriting and advice are not reviewed.

Investment banks provide advice on mergers and acquisitions (M&A) and underwrite share issues, taking up any unsold stock.

According to Lord Myners, institutional investors and company directors are questioning the fees currently being charged, particularly as it is common for several advisors to be appointed in major M&A transactions.

Meanwhile, the typical charge for underwriting a rights issue is around 3%, regardless of how deeply the fundraiser has had to discount the share price to attract investors.

However, where the rights issue price is well below the current trading price of a company’s stock, the risk covered by the underwriter is substantially reduced.