Cost high on agenda as banking giants launch adviser reviews

Deutsche Bank is putting pressure on its legal advisers to increase their use of legal process outsourcing (LPO) as the bank nears the final stages of the first formal review of its external law firm relationships.

Deutsche has told law firms that above all else they must be "innovative" about how they provide a cost-efficient service to the bank – in particular, the bank wants to see firms using LPOs wherever possible.

Deutsche, which is expected to finalise its roster of legal advisers in the coming weeks, has asked firms to provide information not only about fee structures but also potential outsourcing options.

As part of the review, Deutsche is also expanding the use of its internal online tendering system, Click for Legal, across all practice areas, with litigation work the final practice to be added to the system.

The model was launched in 2009 and is used by Deutsche to monitor legal spend. It sees panel firms submit bids for each piece of work, with the in-house legal team then obliged to choose the cheapest of at least three bids, unless there is a specific reason to go for a more expensive one.

Deutsche, which has close ties with firms including Allen & Overy (A&O), Clifford Chance (CC), Linklaters and White & Case, uses more than 100 firms worldwide but has previously reviewed relationships on an ad hoc basis.

The news comes as JP Morgan kicked off a review of its global legal panel last month.

The bank declined to comment but partners at panel firms suggest the review is primarily focused on cutting fees rather than an overhaul of the roster. Firms holding existing relationships with the banking giant include CC, A&O, White & Case, Ashurst, Herbert Smith, Simmons & Simmons, Simpson Thacher & Bartlett, Davis Polk & Wardwell and Mayer Brown.

Commenting on Deutsche's review, one City banking partner said: "What I don't get is that clients seems to be focusing on the flavour of the month, and currently that is outsourcing. The banks get obsessed with one thing and don't look at all the other ways that you are driving down costs in your business."