Credit Suisse First Boston is eliminating assignment fees for clients, the latest bank to do so in an effort to improve liquidity. No retail buyer will be charged a fee on a deal for which CSFB was the agent, and banks that have also eliminated assignment fees will not be charged. Don Pollard, global co-head of the syndicated loan group, said the bank hopes this will be an incentive for other banks to do the same. "This is a change the market was calling for," he said. "As one of the top four underwriters, we're eliminating fees to promote liquidity."
Morgan Stanley Dean Witter eliminated its assignment fees over a year ago, becoming the first shop to do so. Other banks have followed in giving customers a break on assignment fees. Deutsche Bank and Sun Trust Bank started paying up to $3,500 in assignment fees for clients on typical deals. With CSFB's acquisition of Donaldson, Lufkin & Jenrette, it boasts one of the biggest names in bank loan trading. Pollard said he hopes move might set the tone for others on assignment fees, a sore spot with investors. "It's very expensive, and it makes [investors] think twice about buying or selling a loan," he said. "We're hoping the whole market eventually goes in that direction."
Pollard said CSFB has been considering this move for a while. "We finally decided to make the change because the secondary market has become more important than ever before to our investors," he added.
Reaction from rival banks was mixed. "It will probably put pressure on other banks to do the same," one noted, while another added, "This is very good and a very positive direction for them to take." Others sounded less enthusiastic. "People will just incorporate [the assignment fee] into the price of the asset. It sounds like much ado about nothing, but I could be wrong," said one market player. Another noted that assignment fees are not a major cost. "It will help, but it's not going to double trading volume," he said.