Off the record is a collection of unattributed quotes from the market.

"It will not happen and if it happens ... we will deliver the appropriate answer to a problem which will not occur"

Axa’s Gerald Harlin tells Helen Avery about the benefits of balance.

Zurich reported net income of $3 billion for 2008. More impressive was its return of 1% on its investments. Helen Avery spoke to Martin Senn, CIO.

The demise of AIG has inflicted an identity crisis on the insurance industry. But insurers face exposure to distressed assets, accounting and valuation issues and a potential shortage of capital. Sounds familiar? Helen Avery reports on how insurers believe they will avoid the same fate as the banks.

AIU, the rebranded general and commercial insurance division of AIG, tops every global category in Euromoney’s insurance poll. Holding on to customers and staff in the wake of AIG’s collapse into the arms of the US taxpayer has been a tough challenge. AIU chief executive Nicholas Walsh explains to Peter Lee the latest plans to create a separate identity for the division and an eventual IPO.

In a period of financial crisis corporates are particularly concerned about avoiding risk, but are also keen to get their cash working at a time when credit is hard to raise. Competition between top providers is fierce, while there are new opportunities for the second tier. Laurence Neville reports.

A select group of emerging market equity fund managers is aiming to do something different – outperform developed markets in a prolonged global downturn. Staying clear of the crowd will be crucial to success. Chloe Hayward profiles seven leading investors and asks where they will make money in 2009.

Governments on both sides of the Atlantic have announced ambitious infrastructure spending commitments. But they will have to negotiate a much-changed bank lending market to realize their plans. Louise Bowman reports.

Custodians have become one of the few safe havens of the financial markets. If they can manage securities lending without putting assets at risk, their power and influence among clients is set to grow. Helen Avery reports.

Senior and junior noteholders are at war, navigating a complex legal web to extract some value from Europe’s unravelling CMBS market. Louise Bowman explains the limited options available to the servicers stuck in the middle.

Italy’s UniCredit made a €4 billion net profit in 2008, down 38% on the previous year but not as bad as some analysts feared. However, the bank, which is the biggest lender in central and eastern Europe, also recorded an almost 50% jump in bad debt provisions to €3.7 billion. The bank plans to sell up to €4 billion of hybrid debt to the Italian and Austrian governments, as well as private investors, to lift its core tier 1 capital ratio to 7.2% from 6.5%.

Agustin Carstens, the Mexican finance minister, has confirmed that Citi does not have to sell its Mexican unit, Banamex, following the US government’s investment in the US bank.

Last month executives of the world’s largest banks, alarmed at collapsing share prices, told everyone what a profitable start to 2009 they had enjoyed. By the end of the month, shares were rallying. Let’s hope that actual first-quarter 2009 earnings announcements don’t pour cold water on their hopes. Peter Lee reports.

People wanted to believe ponzmeister Madoff because they crave stable, compounding returns. After his spectacular fall from grace, calls to shine a light on the opaque world of hedge funds will be irresistible.

In two deals in as many days, Korean firms reopened Asia’s capital-raising markets. International issuance thus far this year has generally been limited to triple-A rated banks and financial institutions but deals from steelmaker Posco and SK Telecom reopened the straight debt and convertible bond markets respectively. SK was first out on March 19 with a $300 million convertible bond that caused something of a stir in the market for the way in which lead bookrunner Nomura behaved – see the separate story for full details. Posco followed on March 20 with a $700 million five-year bond that was the first dollar deal for an Asian company in eight months. Posco had initially marketed the deal with a guidance yield of 9.5% but in a piece of good fortune for the issuer an announcement by the US Federal Reserve that it would buy back some $300 billion in treasuries triggered a recovery in global bond prices that let Posco’s deal price at 8.95%.

Standard Chartered has arranged and underwritten the first ever RMBS transaction for a state-owned entity in the Philippines. The Ps2.1 billion ($43.6 million) deal for the country’s National Home Mortgage Finance Corp comes in the form of notes with an average duration of five years priced at 8.4437%. There are two classes: senior notes aimed at institutional investors, and subordinated notes that the issuing entity will retain. Margarito Teves, secretary of the country’s department of finance, said that the bonds opened the door for further similar deals. Who said mortgage-backed securities were dead?

Mexican cement company Cemex has initiated talks with its core banks to renegotiate the majority of its outstanding debt: $14.5 billion in syndicated and bilateral obligations.

Brazil’s federal power holding group, Electrobras, has approved its 2009-12 strategic plan for R$30.2 billion ($13.2 billion) of investments.

The country restructured its financial system after the Asian crisis, and so it might have lessons to offer the world. But its recent self-inflicted economic woes are urgent and less worthy of emulation. Eric Ellis reports from Bangkok.

China Life is the world’s biggest life assurer and China’s largest institutional investor. Its president talks to Sudip Roy about the challenges the company faces.

China’s banks are lending a hand to support the government’s efforts to stimulate the economy. But do they risk losing an arm and a leg if the economy fails to grow as expected? Sudip Roy reports from Beijing.

The Venezuelan government has started to delay payments to contractors and oil service companies, indicating that the collapse in oil prices is finally taking its toll on president Hugo Chávez’s wallet.

Turkey is looking to take advantage of the fact that the country’s banking sector remains relatively well capitalized to achieve its challenging overseas funding requirement in 2009. Memduh Aslan Akcay, director general at the department of the treasury in Ankara, says that this year the country is looking to raise at least $3 billion in the international bond markets. This is likely to be the highest total required by any sovereign in the emerging Europe region. In 2008, Turkey had an indicated overseas funding target of $5.5 billion but the market turmoil caused by the fallout from the global credit crunch and associated economic slowdown meant that it was only able to raise $4 billion. So far this year the sovereign has raised $1 billion through a dollar Eurobond and the US currency along with euro will probably account for the bulk of this year’s issuance. "The US dollar and the euro were the main funding currencies so far and will remain as the core markets for us in the future," says Akcay. "On the other hand, we are ready to tap new currencies if and when we believe the conditions are appropriate for a transaction."

With many of its banks among the worst hit by the financial crisis in the Middle East, Bahrain now looks as if it might be a nucleus of GCC financial services consolidation. As elsewhere in the Gulf, there are too many banks in Bahrain considering the size of its economy. Bahrain’s economy is relatively precarious because it has smaller foreign reserves than its neighbours and the government has made large increases in expenditure in recent years. The island is also home to many banks with a regional focus.

The marketing campaign for the first-ever initial public offering from Armenia has been launched despite the fact that the country recently had to abandon attempts to support its currency, the dram, which depreciated by 25% in March.

Latvia’s Parex bank, which was rescued by the government in December after it hit liquidity problems, has agreed a loan restructuring agreement with foreign creditors. The bank is restructuring two loan facilities worth €775 million in total as part of a state-funded agreement. One loan, for €500 million, was due in June and the €275 million facility was due in February. The new terms means that the bank will stagger repayments to nearly 60 different banks over three years. The first tranche, for €232.5 million, was due last month. Parex is only paying a small restructuring fee but its benchmark borrowing costs will rise more than five times. The European Bank for Reconstruction and Development is to take a €100 million stake in Parex too.

Germany’s commitment to the EU project will guarantee bailouts for weaker eurozone members. But it’s a different story for hard-pressed central and eastern European states and their banks.

Saudi British Bank, which is part of HSBC, has appointed a new managing director and chairman. Richard Groves will replace John Coverdale as managing director. Coverdale is heading to Hong Kong to become HSBC’s global co-head of commercial banking.

Fixed-income markets stand at a crossroads. The traditional model is broken. A new breed of debt advisory and trading boutiques believe they hold the key to the future. Some of the biggest names in the bond market are jumping on the bandwagon. Alex Chambers examines whether this is the day of the independents.

Saudi’s PIF to flex its financial muscle

Good timing means telecoms transaction greeted with enthusiasm.

Billions of dollars of foreign investment flooded into fast-growing manufacturers and real estate developers at the height of the China boom. Now, as the economy slows, many badly judged, rushed deals are unravelling, with investors unlikely to recoup more than a tiny proportion of their funds. Elliot Wilson reports.

Mansour Al Maiman, secretary general of Saudi Arabia’s Public Investment Fund, tells Dominic O’Neill how his institution is adapting to the changing needs of his country.

Chinese banks need to grow new income sources from fee-based services such as private banking, cash management, trade finance and investment banking. But they must balance a need to grab market share with their desire to avoid creating another banking bubble. Lawrence White reports from Beijing and Shanghai.

As the Philippines faces the Legacy scandal, president Gloria Macapagal-Arroyo is trying to reassure the world that her country is better placed to withstand the global crisis, after the lessons of 1997. She talks to Lawrence White about Asian regional cooperation, trying to beat corruption and why she’s letting Legacy fail.

The exploitation of natural gas resources looks set to transform Papua New Guinea’s wealth profile and social structure. The downside is the possibility that its undeveloped infrastructure and institutions will be unable to cope with rapid change. Chris Wright reports.

With the business models of many of the largest financial firms destroyed by rapid deleveraging, it suddenly looks smart to be a purveyor of independent advice. The biggest, Lazard, finds corporations, governments and other banks desperate for help in repairing their balance sheets. Peter Lee reports.

Nomura’s handling of SK Telecom’s $300 million five-year convertible bond has left the market asking if it was the bold stroke that will establish the firm as a big player in Asia’s equity-linked market or an over-aggressive piece of business that could harm the market and the bank alike.

In an exclusive interview with Euromoney Zhu Min, group executive vice president at Bank of China, talks about lessons learned from the financial crisis, the limitations of Basle II, and reforming the bank’s risk management.

Michael Ervolini, chief executive of Cabot Research, a behavioural finance adviser to investors, says that an increasing number of investment managers are beginning to analyse their buying and selling behaviour to increase returns. According to Ervolini, most managers could capture more than 100 basis points more in alpha by better understanding their behavioural tendencies.

Saudi debt markets are set for a resilient year, with the promise of more to come.

Some of the smartest people in investment banking are seizing a unique opportunity to set up boutiques.

How do you explain the credit crunch to those outside financial circles? One banker recently told Euromoney that investment banks used to be dating agencies for capital markets:

Global DCM volumes reached $1.26 trillion in the first half of this year but this 2% increase in volumes comes from a 55% drop in deal activity according to recent figures from Dealogic. Corporate investment grade volumes reached a record of $802 billion for the period – more than double last year’s figure, and senior government guaranteed debt was up 38% to $291.6 billion. Structured finance is a shadow of its former self at just $39.7 billion.

Just days after the UK Debt Management Office stated that it would use syndication on a quarterly basis to distribute bonds, a 40-year gilt auction failed. Only £1.627 billion of bids were attracted to the £1.75 billion sale of the 2049 bond. The failure was attributed to a sudden turnaround in investor sentiment for gilts and a function of the distortion caused by the Bank of England’s quantitative easing. The last failed auction took place in 2002.

The final take-up of HSBC’s fully underwritten rights issue to raise £12.5 billion ($17.7 billion) is due to be announced on April 8. It would be interesting to know what the take-up was like among HSBC’s own employees.

Have you recently found yourself trying without success to understand the causes and implications of the financial crisis? Have you longed in vain for the soothing words of a celebrity from the field of popular entertainment to explain to you in layman’s terms what is happening in the world of finance and what it means for you?

Driven by rising oil revenues and booming economies, the number of private equity funds setting up in the Middle East and North Africa boomed until the beginning of the economic crisis. Some 100 funds focused on the region have raised $19.5 billion in capital there. However, now that stock markets have crashed, funds are finding it hard to deploy capital. "The sellers have dried up," says Fadi Arbid, executive vice-president and country head of Saudi Arabia at Amwal AlKhaleej, a MENA-focused private equity house. "Six months ago, companies were looking to sell stakes to private equity firms. Then stock markets crashed – the Saudi market has lost 60% since last August – and private equity funds have had to say to those prospective companies that the prices on the table before are no longer valid." The result has been that sellers have walked away or delayed that process. "It’s very difficult for these companies that are turning a profit and even growing, have great fundamentals, are in a steady environment, but which have seen the market caps of their public comparables wiped. To suddenly hear that they are worth perhaps 60% less today when they are more profitable is difficult to take, and unsurprisingly, they are turning away from selling."

New UBS chairman and chief executive show the pressure the country’s banking system is under.

The euro benefits from being the anti-dollar.

Banks create core tier 1 capital via buyback operations.

Mexico’s transport and communications ministry, the SCT, is expecting soon to relaunch its second federal highway re-concessions programme, Paquete del Pacífico, known as Farac II.

Lehman Brothers and the failed Icelandic banks leave their mark.

Yet more methodology-tweaking by Moody’s and Standard & Poor’s last month brought the prospect of downgrades to the triple-A tranches of cash CLOs ever closer to reality. Moody’s actions early in the month resulted in nearly 3,600 tranches rated double-A and below of 760 US and European CLOs now facing downgrades. S&P’s new approach envisages a 1.6 notch downgrade for senior triple-As, a 4.3 notch downgrade for junior triple-As and a 5.8 notch downgrade for triple-Bs.

Frederic Boillereau has assumed the responsibilities of Andrew Brown, who had been global head of FX at HSBC. Brown’s departure follows three record years for the bank’s FX business and is for personal reasons. Under Boillereau, who has been at HSBC since 1998, HSBC has finally got around to integrating its FX spot, forward and options businesses. Boillereau also remains in charge of HSBC’s metals activities.

Just when government bond investors were growing concerned at fast-deteriorating public finances and huge new supply of bonds to pay for stimulus plans and financial system bailouts, along came a new group of buyers to cap rising yields. Politicians and policymakers know they need to restore confidence to the markets, and central bank quantitative easing, creating money to buy government bonds, certainly looks like a confidence trick.

Much criticism has been hurled at Tim Geithner during his brief tenure as US Treasury secretary, but no one can say that he is not doing his bit to counterbalance job losses on Wall Street.

If China’s capital markets are to mobilize funds a simpler, more coordinated regulatory system is imperative.

Maturity of bond market will be tested as issuance builds.