* JP Morgan paid 7 mln stg for advice on Britannia deal
* 5 mln stg of fee was dependent upon completion
* Banks, regulators need to look closely at fees - Tyrie
By Matt Scuffham
LONDON, Dec 3 (Reuters) - British lawmaker Andrew Tyrie called for a review of fees paid to advisers on M&A deals after it emerged JP Morgan had a financial incentive for the Co-operative Bank's ill-fated 2009 takeover of Britannia to proceed.
JP Morgan executives on Tuesday told Britain's Treasury Select Committee, which Tyrie chairs, that the U.S. bank was paid 7 million pounds ($11.5 million) for advising Co-op on the deal, 5 million of which was contingent on the transaction being completed.
"A fee structure for the provision of independent advice that heavily incentivises one outcome over others strikes me as inherently problematic," Tyrie said after a Treasury committee hearing. "The industry and the regulators will need to look closely at the way such advice is remunerated."
The Britannia takeover, which saddled Co-op with a portfolio of souring property loans, was a major factor behind a 1.5 billion capital shortfall at the bank which has resulted in it falling under the control of U.S. hedge funds.
Tim Wise, a managing director at JP Morgan's UK investment bank, said the payment reflected the way the industry worked.
Tyrie had earlier suggested to JP Morgan executives they had a considerable financial interest in seeing this deal through to completion.
"You weren't sitting there neutrally giving advice, you were thinking there's 5 million riding on this," he said.
Wise defended the arrangement, which is not untypical, and said he didn't believe JP Morgan had suffered reputational damage from advising on the deal.
"In terms of the integrity of our advice and the clarity of our advice and the honesty of our advice that is something that is absolutely fundamental to the way we work and the way the vast majority of the industry works," he said.
"The way that clients choose to pay us whether it's M&A transactions or capital markets transactions is (based) on the outcome of the transaction happening," he said.
KPMG partner Andrew Walker earlier told the committee the auditor received 1.3 million pounds for its work on the deal but hadn't undertaken due diligence on Britannia's commercial loan book. He said that work was done by the Co-op itself.
Co-op Bank's problems worsened last month when its former chairman Paul Flowers was arrested as part of an investigation into the supply of illegal drugs. The bank said last week that had damaged its reputation and it had lost customers.