Financial Services Minister Paul Myners said that there is such a level of concern over the fees that banks charge for services such as M&A advice and over-the-counter hedging transactions that the government could launch a competition probe.

"We would prefer a market solution. However, if the market can't fix itself, then we might have to take action," the paper quotes him as saying.

Myners told a Financial Times conference last week that bankers are pocketing bonuses of up to 10 million pounds, and up to 60 percent of gross fees from merger and acquisition transactions, when most deals represent poor value over time.

(Reporting by Ben Deighton; Editing by Diane Craft)