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August 2000

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  • There are no easy mergers, as Dresdner Bank proved again last month in its failed link-up with Commerzbank. But both this attempt and that between Dresdner and Deutsche Bank were particularly difficult, and their failure ought to be no surprise. Both were defensive deals, aimed at cutting costs and exiting unprofitable businesses – not least retail banking.
  • Since Bashar al-Assad was elected as president of Syria to succeed his father, Hafez al-Assad, with a surprisingly low 97.29% of the vote - his father pulled in over 99% of the vote when he was re-elected - there have been mutterings that Syria might be looking to open up and reform the country's Wnancial sector. The international banking community, however, seems less than excited and in some cases extremely sceptical.
  • The first major online retailer to go from dot com to dot gone, sports clothes site blunted the eagerness of venture capitalists and internet incubators to back virtually any start-up that crossed their paths. European private-equity investors remain in the race to spot and back the most promising new entrants in the dot com arena, but they are treading much more carefully. Many have given up on business-to-consumer start-ups entirely and only back business-to-business ventures. Other specialist investors are searching for opportunities in internet infrastructure and wireless technology. Crafty internet entrepreneurs are redrawing business plans to fall in with the latest investment enthusiasms. Plenty still dream of making internet fortunes, but most recognize the need to embrace old-economy business disciplines. Britt Tunick reports
  • Author: David Roche Bank of Japan governor Masaru Hayami missed a step when the bankruptcy of the Japanese retailer, Sogo, stopped him ending the zero interest-rate policy (ZIRP) at the BoJ’s July meeting. But he looks determined to end ZIRP within the next two months.
  • The financial playing field in Japan is as loaded against the foreigner as baseball is there. That’s the message sent out by recent disciplinary actions against foreign securities houses. But the dynamics are more complex. The new Financial Supervisory Authority needs to show who’s boss. And historically there have been more constraints on Japanese than foreign firms. Kevin Rafferty reports
  • The guaranteed bonus, like the jumbo shrimp and military intelligence, is a bit of a contradiction in terms. A bonus implies something given as a reward for exceptional performance. Guaranteeing it makes it more of a right, like a normal salary. But the business appeal of this catchy oxymoron is in high vogue on Wall Street as firms respond to the lure of dot coms. In years’ past only a few firms would be paying guaranteed bonuses, often during a rapid build-up and to compensate new hires for the risk of joining from established firms. Such guaranteed pay-outs were regarded as a sign of weakness. Now they have become commonplace. James Smalhout reports
  • More and more emerging countries are developing asset-backed securities markets as a way to improve on inefficient bank financial intermediation. The aim is to stimulate domestic investment, as well as to attract international investors that have long bought emerging-market issues backed by hard-currency receivables. With a little help from the IFC, mortgage securitization schemes are now running in Argentina and South Africa. The IFC has also helped develop more complex lease securitizations in Korea and Turkey. If securitization markets are to grow as big as those in Europe and the US, radical changes are needed in bankruptcy laws, regulation and standards of disclosure. James Smalhout reports
  • Euromoney takes a look at three publicly available models: PortfolioManager, CreditMetrics, and CreditRisk+.
  • Even the whiff of a country’s likely exit from eurozone membership could cause a run on that country’s banks and become a self-fulfilling prophecy. That is the logical conclusion of an exercise that few within the eurozone, or even outside it, dare to rehearse. It could destroy the euroland banking system. But the European Commission’s own president, Romano Prodi, has twice raised the taboo subject of a euro exit. The intellectual challenge of predicting how things would work out won’t go away. Brian Kettell takes us through a hypothetical French exit.
  • Big rises for Asian banks reflect not only their gradual recovery from crisis but the scale of the hammering they took a few years back. Many are still regarded by analysts as weak though in the longer run their position could be stronger than those banks which have not yet been forced to reform. This year’s top 250 emerging market banks, prepared by Moody’s Investor Services, shows the considerable changes that are taking place in the sector. Keri Geiger reports
  • While US asset managers continue to be seen as the world’s biggest players, European institutions are catching up. Intersec Research Corporation’s latest ranking of the top 250 non-US asset managers shows who is growing fastest
  • Author: Gill Baker Thailand has a huge number of debt restructuring cases and non-performing borrowers but they are steadily being dealt with. And the signs are that the authorities are starting to break the back of the problem, although there is still a long way to go.
  • The explosion in M&A and restructuring activity across Europe has triggered a transformation in the types of financing structures employed. Law firms are already restructuring themselves to take advantage of the shift. By Nigel Page
  • Author: Nigel Dudley
  • Author: Mark Mulligan Chile’s parliament is close to passing a law that started life as a proposal to protect minority shareholders but now covers everything from stock options and share buy-backs to control of the country’s banking sector.
  • The recent improvement in performance at Phillips & Drew will provoke mixed reactions in Tony Dye, according to those who know him best.
  • By adding strategic advisory and outsourcing capabilities to their core services, banks are dressing up traditional cash management and treasury offerings as ‘e-business solutions’. Are these pioneering moves into the new economy enough to win in a web-enabled world? Rick Butler reports
  • A piece of Hans Dalborg’s Nordic jigsaw is missing: the Norwegian one. His bid for Norway’s Christiania Bank is taking time to process. But MeritaNordbanken, the region’s biggest bank, is on a roll. It already has 9 million customers and 1.5 million of them are online. No wonder the big banks down south are eyeing his operation greedily.
  • Fancy Taif rather than Tenerife for your next summer vacation? Reckon property prices in Riyadh have more upside potential than those in Rome? If so, why not take the next flight to the Kingdom of Saudi Arabia? Although you’ll need a visa, you may soon be able to acquire one without jumping through the tortuous hoops of finding local Saudi sponsors prepared to vouch for your good character. Saudi Arabia, historically fortress-like in its approach to uninvited guests, is starting to open its doors to unlikely visitors. The Kingdom has just passed a new investment law described in a recent report published by the Saudi American Bank (Samba) as a “U-turn away from the old investment system”. It is also gearing up to give foreigners direct exposure to a stock market that has so far been accessible only via a single investment trust and (more recently) mutual funds. New legislation is being prepared that will allow foreign individuals to buy Saudi real estate. And senior Saudi policymakers are even talking seriously about more tourism – not just of the local, regional or religious variety, either. After all, the thinking seems to be, other Gulf economies have seen tourists landing on their shores, and survived. So if western visitors can be persuaded to dress sensibly, and to resist the alcoholic temptations of duty-free shops en route, where is the harm in encouraging a limited number of them to spend their dollars, pounds and euros in the Kingdom?
  • Author: James Smalhout Those tough guys on the Bank of Japan’s policy board did the right thing in spite of themselves when they met on July 17. The group had been flirting since April with the idea of ending its policy of zero overnight interest rates. The rate first hit zero in February 1999. In the end, they voted not to hike it, but threatened to do exactly that if Japan’s recovery continues much longer. Only the bankruptcy of the Sogo department store a few days earlier made the policy board flinch.
  • The merged UBS found itself with two brand name asset managers: Brinson Partners and Phillips & Drew. Trouble was both were performing badly looking for value in markets that only rewarded growth. Investors lost their patience and finally star managers Gary Brinson and Tony Dye quit. Where do they go from here? UBS is merging the operations but keeping the names. The philosophy also stays on a bet that the pendulum has swung back and value investing will again produce results. Julian Marshall examines the chances
  • Mitsubishi, Japan
  • Author: Rupert Wright
  • Managing director, European fixed income distribution, Barclays Capital
  • As investors load up on European high-yield bonds they are faced with problems in every direction. Credit portfolio models are unreliable because of the lack of data on everything from default rates, rating downgrades, recovery rates and correlation between assets. Only when European corporates have been through a severe crisis will the required performance data be available. Anja Helk reports
  • Described as being Castro’s favourite capitalist, much to the disdain of the US Treasury Department, Ian Delaney, chairman of Sherritt International Corporation, the Toronto based mining company, is back in the news. Five years after being accused of “doing a deal with the devil” by Marc Thiessen, an aide of the US Senate’s Foreign Relations Committee for daring to invest in Cuba and going against the US government’s anti-Cuban Helms-Burton legislation, Sherritt’s Delaney has now annoyed the Germans. And there’s going to be a face-off in the courtroom.
  • In July’s awards for excellence the text on Bahrain was omitted and we failed to include Qatar National Bank as joint winner of the award for best domestic bank in Qatar. We run these sections below.
  • Abbey National’s eye-catching mortgage-backed securitization (MBS) programme has touched a new height with its £2.25 billion ($3.375 billion) Holmes Financing 1, the largest ever securitization of European mortgages. Brian Morrison, the bank’s director of treasury services and international, says making the bonds fully SEC registered opens up a vast investor base in the US. “This takes us into a new ball game, which is the really big market,” he says.