Credit Suisse First Boston Corp. is the latest Wall Street firm to drop fees on syndicated loan trades.
The company said Wednesday that it has eliminated assignment fees, which are paid to agent banks to compensate them for the paperwork involved when a loan is sold from one investor to another. Credit Suisse said the elimination of the charges, which typically range from $1,000 to $5,000 per trade and are split between the buyer and the seller of the loan, would promote more liquidity in the U.S. syndicated loan market.
Deutsche Bank made a similar pledge in January, joining the likes of Morgan Stanley Dean Witter & Co., and UBS Warburg. The companies are all vying to compete in the trillion-dollar U.S. loan market, and are pushing bigger rivals J.P. Morgan Chase & Co. and Bank of America Corp. to play along.
"The fees are onerous and put up barriers to liquidity," said Don Pollard, global co-head of syndicated lending at Credit Suisse. "We're hoping the whole market moves this way."
Though growing, the secondary market for syndicated loans is still dwarfed by the bond market. Annual loan trading equates to little more than one week of trading in corporate bonds. Assignment fees are not levied in the U.S. corporate bond market.
Credit Suisse and the other companies, thus, are not being entirely altruistic. Waiving the fees creates goodwill among the growing ranks of institutional fund managers who buy bank loans, many of whom have been clamoring to have the fees waived.
Mr. Pollard said that Credit Suisse has been chipping away at its fees in recent months, and decided that it was time to eliminate them altogether. But the company said it will not waive the fees for traders at financial institutions that haven't waived their own fees, which will ratchet up the pressure on rival firms.
Deutsche Bank said in January it would waive the fees for clients on loans on which it is the agent and pay the fees for its clients if the loans were agented by other banks. "We're pleased that so many other banks have joined us" in dropping the fees, a spokesman said.