"To me it's a more fundamental underwriting issue".
Andrew Davidson, a structured-finance consultant, suggests an "origination certificate", guaranteeing the quality of the underwriting, issued by the lender and broker, which stays with the loan.
They had already been "spun"—given, if you prefer to favoured clients of the investment bankers underwriting the issues.
If Bradford & Bingley is any indication, investment banks will have grown more cautious about underwriting rights issues.
Disclosed fees for underwriting new issues sank about 45percentto to $2.64 billion, from $4.8 billion in the first quarter of 2000, and about 20percentt from $3.29 billion in the second quarter of 1999.
Much investment-banking business, such as foreign exchange or bonds, is now commoditised; and the juicy business of mergers and acquisitions or underwriting share issues is increasingly going to a mere handful of firms.
Trading in top British shares was starting to move to New York, where investment banks were able to offer keener prices because they could combine broking and market-making as well as underwriting new issues.
Britain's biggest fund managers, in alliance with corporate advisers Lazard and Rothschild, are drawing up radical plans to carve the big City investment banks out of part of the lucrative market for underwriting rights issues.
The incentive for credit analysts, who look at company debt rather than shares, to exploit similar conflicts was never as great: the fees from underwriting debt issues do not compare with those from share flotations.Still, it seems that on the debt side temptation was not entirely absent.
Kim S. Fennebresque, chief executive officer of SG Cowen, an investment bank that specializes in underwriting stock issues for the health care and technology companies that have been hardest hit in the last month, held a conference call Friday to reassure his employees that Cowen's future remained bright.
