A significant component of RBS' new issue has been institutional loans, and buyside accounts expect the bank to not only provide research, but also make a market in the names, said one banker. He added that waiving assignment fees creates liquidity for the product.
The group also comprises Credit Suisse First Boston, Citigroup, Deutsche Bank,Goldman Sachs, Wachovia Securities, Merrill Lynch, Scotia Capital, Lehman Brothers, Bear Stearns, Morgan Stanley, UBS,The Bank of New York, National City Bank, SunTrust Bank and TD Securities.
Prior to the initiative, most banks charged a $3,500 fee when a name it is agent on traded away from the desk. Fees had long been a complaint in the market but in the past two years the issue became more of a hot topic as the size of individual trades shrunk from $10 million to less than $2 million. In addition, the number of CLOs operated by buyside accounts increased and accounts were being charged for each sub-allocation. Finally, buysiders were questioning whether modernization of the asset class through technology had not reduced the cost significantly below $3,500.
The popular movement to eliminate assignment fees began over a year ago when CSFB's par trader and Managing Director Barry Zamore, rallied the buyside to pressure banks to change their policies. "He had a huge part in this. He is consistently driving this issue hard," said one banker. Citigroup then offered to waive fees on a reciprocal basis in November.
Conspicuous from the group are JPMorgan and Bank of America, who are the number one and two lead arrangers of deals in the U.S., respectively. Spokespeople for the two banks have repeatedly declined comment on the issue, but rival bankers have commented that the two support large back-office operations creating significant revenue for the firms. B of A has reduced the amount of the fee from $3,500 to $2,500 for up to four sub-allocations on vehicles. After four deals there is a charge of $500 each. But wiping out assignment fees entirely would be a "big nut for the banks to swallow," said the banker.
