* 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 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
"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
"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