Finance and Insurance Market: Underwriting Fees

Lord Eatwell Excerpts

Wednesday 12th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am obviously interested to hear from the noble Baroness who has great experience in these matters. However, as she well knows, a range of outcomes could emerge from the OFT market study. Those could include enforcement action taken by the OFT through a market investigation reference to the Competition Commission, recommendations to government to change law or regulation, voluntary action by industry players or, indeed, a clean bill of health. We should wait to see what the OFT recommends.

[Lord Eatwell]

My Lords, is not the truth of the matter that the complete failure of the Government to persuade the banks to lend has forced companies into increasing rights issues and that the banks have used corporate desperation as a lever to charge higher underwriting fees even when market conditions have improved? Does the Minister agree that this is prima facie evidence of an underwriting cartel? Does he regard this as a legitimate way for banks to repair their balance sheets?

[Lord Sassoon]

My Lords, first of all, I do not accept for one moment the premise about government action in some way preventing companies borrowing from the banks, because, as we discussed at some length yesterday, the Government are taking a considerable amount of action to make sure that the banks lend and increase the amount of lending over what they would otherwise have done. As to the noble Lord’s questions about the underwriting market, again I would wait until the OFT has come up with its report within the next few weeks.