Global financing 2002: A flight to complexity

Credit markets have contracted dramatically in recent months and all but the safest borrowers, which have benefited from a flight to quality, have had to pay a high price for funds. On the buy side investors want assurances that they will be protected from risk. The banks that have performed best in this year’s capital-raising poll are therefore those that have come furthest in developing complex products that can save money for borrowers and enable lenders to hedge effectively.

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results:

Capital raising
Overall
Domestic markets
Risk management
Overall
Interest rate products
Foreign exchange
Equity derivatives plain vanilla
Tailored/structured products
Credit derivatives
Commodities

Over the past few months, banks’ capital-raising capabilities have been tested to the limit. Last year, buoyant debt markets compensated for comatose equities. But in 2002 shocks from such collapses as Enron and WorldCom have soured sentiment in credit markets as well. At the same time M&A-related finance from such sectors as telecoms has dried up, as dangerously leveraged operators find themselves shut out of the market.

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