RPT-UPDATE 3-Investment banks escape UK action on fees

(Repeats with link to Breakingviews column)

* Equity underwriting fees rose in 2009, have stayed high

* OFT says shareholders not applying enough pressure on fees

* Companies, shareholders better placed than regulators

* Recommends competitive tenders, itemised billing

(Recasts)

By Paul Hoskins

LONDON, Jan 27 (Reuters) - Investment banks escaped action to force down the fees they charge on Thursday when Britain's Office of Fair Trading left it up to fund-raising companies and their shareholders to kickstart competition.

The Office of Fair Trading said that while the equity underwriting market lacked effective price competition, it was up to companies and institutional shareholders to drive greater competition.

"The OFT considers that concerns around the level of fees can be tackled most effectively and efficiently by companies and institutional shareholders rather than further intervention by the competition authorities," it said in a statement.

Investment banks are under a broader spotlight over the size of bonuses they pay employees for their part in the reckless lending that precipitated the financial crisis.

The OFT, which launched an investigation into underwriting fees last June, said fees had been slow to come down from higher levels seen during stock market volatility in 2008 and early 2009. [ID:nLDE6590AX]

But it saw no need for competition authorities to intervene in the sector.

"We have identified a number of options which would enable companies and institutional shareholders to drive greater competition for themselves, which we believe is the most effective and efficient way forward," said OFT Senior Director of Services and Public Markets, Sonya Branch.

The OFT recommended companies look at awarding and agreeing fees for different aspects of the work at different times, perhaps using a range of banks to complete the various tasks in a share sale.

It also said fund managers should take more responsibility by urging companies not to overspend on fees to the detriment of shareholder value. They could also take some of the risk on their books themselves to lower fees, the OFT said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Reuters Breakingviews column on [ID:nLDE70Q22G]

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J.P. Morgan (JPM.N) has been the top deal-maker in equity capital markets for two years running in Europe, the Middle East and Africa, Thomson Reuters data showed, earning $779 million in in 2009 and $230.5 million last year. It declined to comment.

The 350 leading companies listed in London raised an estimated 50 billion pounds ($80 billion) equity capital in 2009, paying around 1.4 billion pounds to banks in the way of fees, the OFT said.

Average fees rose to more than 3 percent of the amount raised from around 2 to 2.5 percent from 2003-07, the OFT said. (Additional reporting by Sudip Kar-Gupta; Editing by Dan Lalor and Andrew Callus) ($1 = 0.6287 pound)