Investment banks face OFT probe over fees

The Office of Fair Trading has launched an investigation into the fees investment banks charge companies for advice on mergers and cash-calls.

Over the summer, the OFT will look at the rising costs but will also probe claims the top banks dominate the market, closing out competitors and limiting choice for companies.

The OFT will investigate  the costs of rights issues - when companies ask for more cash by issuing more shares - and other types of cash-raising exercises by the 350 largest UK public companies, to consider whether users' concerns are justified.

Clive Maxwell, OFT senior director of services, said: 'Economic growth and productivity rely on companies being able to raise capital efficiently for investment.'

Liberal Democrat Treasury spokesman, Vince Cable, has said that a ‘magic circle’ have been stifling competition by shutting other firms out of the biggest deals.

And former City Minister Lord Myners suggested the large investment banks operate a kind of oligarchy - similar to findings by the Monopolies commission back in 1998.