How to survive the crisis
For some financial institutions and companies, the Asian crisis is an opportunity. For others it's a simple matter of survival. Investment banks have been among the quickest to slash costs and focus on core businesses. But while some commercial banks are recapitalizing and making provisions for bad loans, others are preparing to expand. Pauline Loong reports.
The Chinese word for crisis, points out Mervyn Davies, chairman of the Hong Kong Association of Banks, is written with two characters: one depicts risk and the other opportunity. "Companies can't go to the stock market for funds now and can't raise debt capital," he says. "Thus there is the opportunity for banks to provide equity finance." In this new environment, institutions that know their markets well will be at an advantage.
The days of suitcase bankers, who flew in and out of the region with little market knowledge, are gone. To make money now, banks must have good local intelligence. They need to be aware that the crisis hit different countries in different ways. In Hong Kong, for example, Davies says the one message that has come out of the crisis is that the territory is well regulated and well controlled and has a strong banking system.
Responses among banks and corporations to the Asian financial crisis have differed greatly. A rare few have already seized the opportunities for new business. But the immediate response of most has been to cut costs, restructure operations and scale back unprofitable areas. Some strategies for handling the crisis are almost universal.