INVESTMENT banks are to come under the glare of the Office of Fair Trading (OFT) after the watchdog today announced a study into some of their fees and services.

The OFT said it planned to look at the equity underwriting market - where companies raise funds through share placings - after concerns were raised.

Last year recession-hit companies raised about £70 billion of equity capital in the UK and forked out an estimated £2 billion in charges, according to the OFT.

The OFT's probe, to be launched formally later this summer, is expected to cover fees, services and whether there is adequate competition in the equity underwriting market.

It will also look at potential conflicts of interest involved in the services provided by banks.

City groups with investment banking divisions that handle share placings in the UK include part-nationalised Royal Bank of Scotland and Barclays, as well as US firms Goldman Sachs, Morgan Stanley and Citigroup.

The OFT study follows mounting worries over the amount of money charged by banks in the recession at a time when a slew of listed companies were forced to turn to investors to shore up their balance sheets through share placings.

The financial crisis impacted the amount of competition in the investment banking market, with Lehman Brothers collapsing and a raft of others merging to survive.

Banks themselves admitted they had benefited from the lack of competition and a number of figures, including former City minister Lord Myners, were vocal in condemning the fees being charged.

Clive Maxwell, senior director of services at the OFT, said: "Economic growth and productivity rely on companies being able to raise capital efficiently for investment.

"We plan to study the efficiency of the equity underwriting market and identify any areas for improvement.

"Our study will also help us to advise the Government in its wider thinking about wholesale financial markets."

The OFT said "initial discussions'' had confirmed some dissatisfaction among listed firms.

It will now consult further before deciding on the scope of the study.

Equity underwriting has been investigated by competition regulators before, with four reports into the market since the mid-1990s.

It is a lucrative business for investment banks, even more so since the credit crunch struck.

They charge to advise on equity placings, as well as to arrange and even underwrite themselves, which means they commit to taking shares.

The huge sums involved came to the fore during the mammoth fundraisings launched by banks themselves in the wake of the Lehman Brothers collapse.

Lloyds Banking Group’s record-breaking £13.5 billion rights issue last November delivered a £500 million fee bonanza to those involved in the capital raising.