Special relationships

Why UK banks are appointing more US firms to their rosters

Barclays and HSBC have something in common: they both introduced sub-panels of US firms in their latest big legal adviser reviews. Barclays added Cleary Gottlieb Steen & Hamilton, Shearman & Sterling and Sullivan & Cromwell to its general advisory panel, while HSBC gave new places to Cleary, Latham & Watkins and Mayer Brown on its global roster.

White & Case, meanwhile, is the only firm to emerge so far as a successful applicant for re-admission to the Deutsche Bank worldwide panel.

Some partners at UK firms deny there is a shift towards US rivals winning places on financial institutions’ panels, but the latest reviews suggest big clearing banks are turning to the London arms of US firms more and more.

One factor is the volume of assets Barclays has in the US, where it bought Lehman Brothers’ core business following the latter’s collapses. HSBC, similarly, has a sizeable US business.

Second, there is increased interest in the bond markets from clearers. The high-yield bond market is in the hands of the magic circle and US firms.

Third, the US firms’ push to expand and recruit partners – and their client relationships – in London could now be paying off, with the trend continuing: Cadwalader, Wickersham & Taft, Milbank Tweed Hadley & McCloy and Shearman & Sterling have all hired finance partners laterally in the City since May.

Finally, the relative quietness of investment banks has forced US firms to lobby for places on clearing banks’ panels, despite the fact that these traditionally produce smaller deals, with poorer fee potential. The likes of Barclays, HSBC, Lloyds Banking Group and RBS give fees far lower than those required by US firms who feed off Citibank and JP Morgan.

RBS is set to conclude its panel review shortly, while Lloyds is also assessing its roster options. Expect one or both of the banking juggernauts to unveil a greater number of US firms on their panels than in previous rounds.