Investment banks face inquiry by watchdog

Investment banks are to come under the glare of the Office of Fair Trading (OFT) after it announced a study into some of their fees and services.

The OFT said it planned to look at the equity underwriting market – where companies raise funds through share placings – after concerns were raised.

Last year recession-hit companies raised about 70bn of equity capital in the UK and forked out an estimated 2bn in charges, according to the OFT.

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The OFT's probe, to be launched formally later this summer, is expected to cover fees, services and whether there is adequate competition in the equity underwriting market.

It will also look at potential conflicts of interest involved in the services provided by banks.

City groups with investment banking divisions that handle share placings in the UK include part-nationalised Royal Bank of Scotland and Barclays, as well as US firms Goldman Sachs, Morgan Stanley and Citigroup.

The OFT study follows mounting worries over the amount of money charged by banks in the recession at a time when a slew of listed companies were forced to turn to investors to shore up their balance sheets through share placings.

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Banks themselves admitted they had benefited from the lack of

competition and a number of City figures were vocal in condemning the fees being charged.

The OFT said "initial discussions" had confirmed some dissatisfaction among listed firms. It will now consult further before deciding on the scope of the study.