Over-capacity is the issue — not lack of competition

15 Dec 2010

First it was politicians and regulators bashing the banks, now it’s institutional investors. But if there’s one thing that the ECM market can be thankful for in the Institutional Investor Council’s attack on rights issue fees this week, it is the timing. ECM and corporate broking are about as competitive as possible right now. In a couple of years’ time, though, it might be a different story: another lukewarm year for dealflow could put serious pressure on the industry to reduce capacity.

Companies will no doubt attempt to use the conclusions of the Institutional Investor Council’s report into UK rights issue fees — that they are too high and not transparent — as a stick to beat their banks down. But to what avail? Competitive pressures have already reduced ...

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