As in all other areas of financial services, the credit crunch has made its presence felt in international cash management. Banks and corporates have found their relationships and business practices severely tested and have found out who they can, and cannot, trust in a downturn.

Those of us involved in finance tend to treat the vagaries of investment banking as a matter of life and death.

Deleveraging is the key word of the moment and there is still a long way to go for banks and hedge funds. Beyond that, the impact in the real economy of the banking crisis is only just starting to appear. The tools at governments’ disposal may not be strong enough to handle the challenge. Is a raft of new regulation inevitable?

Kazakhstan has emerged as the principal conduit for South Korean investment in central Asia. Guy Norton reports from Almaty on the future for cooperation.

In 2009 corporate issuers are likely to join financials in seeking to push through equity issues aimed at repairing balance sheets. Intricate measures might be needed to attract investors. However, IPOs look set to be less thin on the ground than in 2008 – at least by mid-2009. Peter Koh reports.

"There are concerns that bonuses may increase the appetite for risk," warned Anthony Bellchambers of London’s Futures & Options Association in a prophetic comment from a January 1998 Euromoney, ‘The end of the bonus bonanza?’

Investment bankers are struggling in so many ways. The operating environment is far from rosy. Round after round of redundancies are announced and yet even those spared the black-bin-liner treatment are left wondering whether they might have drawn the short straw – the business is not going to be much fun for the few left behind. For those who do have jobs, such is the disdain in which the profession is held by the general public that many are finding themselves having to lie to avoid discomforting situations.

Global stock markets are at their cheapest for 25 years. Belated measures taken by the US authorities, and possible stimuli from the new Obama administration – and not forgetting a proper historical analysis – show rewards will come in 2009 for those brave enough to buy, writes Charles Dumas.

For those senior bankers bemoaning the fact that they were not awarded a bonus this year take heart – things could be worse. You could be working for Credit Suisse. The Swiss bank decided to pay employee bonuses for 2008 with illiquid leveraged loan and CMBS debt that no-one else will touch with a bargepole.

"We call upon the top management of the commercial banks to take these decisions into account and recognize that they are operating in an environment in which a lot of the fundamental risks to liquidity and solvency have been addressed. There now is a different situation because of the actions of central banks and governments. The banks should recognize that they are no longer in a similar state of shock as they were for example in September"

Euromoney was emailed this from a Wall Street contact:

It wasn’t all gloom as a post-crisis financial world looked forward to a belt-tightening 1998, though: one reader found time to send a poem eulogizing the euro before its launch. Perhaps Ms Opal Innsbruk’s ode can encourage in these dark times as it did over a decade ago:

"I was going through passport control and they asked me the purpose of my visit and what I did. For the first time in my career, I thought "I can’t say I’m a banker, I’ve got to say something else – maybe I can tell them that I’m a doctor."

US policy failures in the autumn of 2007 were crucial both in letting the financial crisis fester and then spiral out of control, and in a premature, panicky slashing of interest rates that paradoxically aggravated the slowdown severely, writes Charles Dumas.

Who dropped the ball?

The credit crunch has spread to emerging Europe – despite what the region’s central bank governors may claim. They have taken action to bolster liquidity and shore up the banking sector. Chloe Hayward asked 14 monetary authority heads what more they can do to manage the inevitable downturn.

Just two years after facing its previous financial crisis, Hungary is once again in trouble thanks to over-reliance on foreign markets. But it is not necessarily the banks that need saving. Jethro Wookey reports from Budapest.

In the first of a series of interviews for 2009 with some of the world’s leading corporate chief executives, boss Antonio Brufau talks to Laurence Neville about his strategy for keeping a top-10 energy company on track in challenging times.

Agency brokers have returned to fixed income just as investment banks have withdrawn from the market. Will they be able to create dark pools of liquidity and repair the breach in the distribution of debt securities? And does their increasing power herald the return of the primacy of relationships?

In the past few months the Russian capital markets have been hit by a rush of selling as spooked investors head for the exit, sending valuations into free fall. Guy Norton reports from Moscow on what lies in store.

After enjoying years of plenty, the country’s investment banks are facing up to the prospect of leaner times ahead. Guy Norton reports from Moscow on how they are looking to survive the economic downturn.

Unlike most sovereign wealth funds, the State Oil Fund of Azerbaijan is still growing strongly and looking for more foreign risk. Will the country’s experience of the global downturn rob the international capital markets of a new hope? Dominic O’Neill reports from Baku.

In this downturn, corporate restructurings will be driven by problems at the banks rather than the struggling companies themselves. Louise Bowman explains why.

Jordan’s Arab Bank is one of the most influential financial institutions in the Middle East. It has thrived for nearly 80 years, largely because of a strict risk management policy. Sudip Roy reports from Amman on how the bank is managing the financial crisis.

When it comes to retaining clients, hedge funds can’t win at the moment.

The Latin American hedge fund index compiled by HFR was down 25.41% at end of November as the Brazilian real was hit, but compared with Russia/eastern Europe and Asia ex-Japan, which were down 53.95% and 35.61%, respectively, the region is the safer of the emerging markets.

The European Commission has launched a public consultation into the adequacy and supervision and regulation of hedge funds and private equity funds. For private equity, the focus will be on corporate governance, transparency and reporting. Issues of transparency, oversight, risk management, capital and short-selling are to be looked at as far as hedge funds are concerned.

Jeremy Isaacs, the former chief executive of Lehman Brothers’ European business, has set up a boutique investment firm with Roger Nagioff, Lehman’s former head of fixed income. The firm will be called JRJ Investments.

Louis Hagen is to leave the association of German Pfandbrief banks (VDP) to join Münchener Hypothekenbank’s board of managing directors. Hagen is executive director at the VDP, and is known for his spirited and often eccentric promotion of the Pfandbrief at various covered bond events around the world. Hagen was also chairman of the European covered bond council between 2004 and 2007. His departure follows Henning Rasche’s decision to leave the board of Eurohypo to concentrate on his role as president of the VDP. Hagen is succeeded by Jens Tolckmitt, general manager of the association of foreign banks in Germany.

Credit insurer Coface is to launch a financial ratings service in the UK. By using company information, credit insurance expertise and its own expertise, the firm aims to be able to offer spot ratings on a medium-sized company for a starting price of just £4,000. Coface has criticized the draft EU regulation for rating agencies saying that it will increase costs without having any impact on quality.

The liquidity crisis has contributed to a dramatic change in the trading of fixed-income securities. A year ago the curtailment of the liquidity to investors could be written off as a temporary state of affairs that would be rectified as soon as market conditions got back to normal.

The endless series of new index lows has repeatedly confounded investors who see equities as having become cheap again. The rally at the end of last year has raised hopes once more that valuations might have found a bottom. However, for some leading strategists, what looks like cheap today may not be cheap enough.

European institutional investors and banks were increasing their use of equity derivatives in the months leading up to the events of September and October 2008 but it remains unclear how much of this business will ultimately be affected by the financial crisis that has also hit structured products and equity derivative investors and traders hard.

Asia has proved less immune to the global downturn than was once thought.

Fund of hedge funds Pacific Alternative Asset Management Company (PAAMCO) has taken on the investment team of KBC Alpha Asset Management, a $700 million pan-Asian fund of hedge funds business. PAAMCO has $9 billion in assets under management.

Hedge funds were ill-prepared for a downturn. Survivors of the shake-out will need to develop their business management skills to cope, says Nick Evans, editor of EuroHedge.

The Norwegian government and Eksportfinans have announced a facility that will provide long-term financing for the country’s export sector.

Irish divestment would be severe test for weakened loan market.

The European secondary loan market was bracing itself for a painful year-end in December as balance-sheet-driven forced selling started to bite.

TraderTools has unveiled a compact keyboard, the AI-1, which it says will simplify the trading process. It comes with extra-large, colour-coded keys that should prove extremely useful for those old spot dealers who have delayed their retirement because of the lack of a bonus in 2008. The keyboard can be connected to a wide range of trading platforms. I did suggest to TraderTools that it should launch a version with a ‘mom tick’ button for all the snipers that still exist in the market, but apparently there’s not that great a demand for it any more in spot. In options, though, it’s a different matter.

Not all doom and gloom for 2009, though capacity will be tested.

The CME has hired Mark Thompson as a director. His main task will be to look after the exchange’s hedge fund clients on the US’s eastern seaboard. Thompson, who joins the exchange from UBS, will be based in New York and report to Tina Lemieux, the exchange’s managing director, hedge funds and broker services.

Hybrid capital issuance threat from Deutsche Bank’s non-call.

Investment bankers out of a job might do well to consider a career in alternative investments in 2009.

–38 the average percentage return from IPOs globally.

Private equity firm the Carlyle Group has announced plans to cut 10% of its staff, some 100 employees. It will be the first firm-wide lay-off in the group’s 20-year history.

Saxo Bank has had a mixed press this year, which is perhaps testament to the fact that it can no longer be considered to be a junior upstart in foreign exchange.

Levels quoted make no market sense whatsoever.

Having negotiated away their covenant protection in the boom years, lenders find themselves in a weak negotiating position in the bust.

Non-performing loans will haunt the People’s Republic in 2009.

Madoff should mark the end of feeder funds.

Five years ago, Euromoney was catching up over lunch with a senior figure at a large European bank. Something was troubling him. His private bankers were reporting that emissaries from a large US-based hedge fund had been approaching wealthy European clients telling them that they had unearthed a secret formula to extract regular, risk-free returns from the stock markets.

Relationships count more than ever in the world of equity trading.

The US Commodity Futures Trading Commission has secured more than $12 million in restitution and civil monetary penalties against nine Florida defendants in settlement of an anti-fraud lawsuit related to the marketing of illegal off-exchange FX options.

Data released by Icap, CME and CLS all provide support for what market participants have been saying for the past few weeks – liquidity is drying up. Daily turnover on Icap’s EBS platform averaged $167 billion, a fall of around 32% from November 2007 and from October 2008. Similarly, the CME saw turnover in its futures and options average 471,000 contracts a day, down 26% on November 2007. Elsewhere, CLS says it settled a daily average of 588,416 instructions with a value of $3.25 trillion. In comparison, it settled 727,934 instructions in October and 488,000 deals in November 2007. Of course, November 2007 was an exceptionally busy month, which has probably exaggerated the severity of the annualized decline.

At the start of 2008, Paul Day, deputy head of research at MIG Investments, predicted that sterling would be the dog of the FX market in 2008. He reckoned that it would plunge to parity against the euro – a prediction that many thought singled him out as being barking mad.

Few would have predicted such a result given the underlying doom and gloom in the financial markets, but Icap’s 16th annual charity day, held on December 10, proved another outstanding success. The company donates all of its brokerage earned during the day to various charities. Last year, it raised a record £9.2 million ($14 million) and few realistically expected that figure to be surpassed. However, despite the sombre mood nearly everywhere else, the atmosphere at Icap was buoyant. As has become the custom, the company’s offices around the world were visited by a string of celebrities throughout the day.

A fuller understanding of true trading costs should help decisions about post-trade functions.

India’s largest corporates, desperate to shore up working capital or pay the interest on overpriced flagship acquisitions, are trying every trick in the book to raise cash from investors, banks and non-bank financial institutions.

Government support has prevented a systemic run on the banks, but funds are not getting through.

One month after the Kuwaiti stock exchange reached its lowest point for more than three years, there has been a turnaround. On November 17, the market had lost almost half its value since the beginning of the year and fallen by about a third in just one month. One month later, however, it had recovered almost half the previous month’s loss. Why?

Kazakhstan’s bankers are taking a defiant stance towards the financial crisis. Despite the fact that important sectors of the economy such as banking and construction have been hit hard by the global credit crisis, which has cut off the supply of cheap foreign funding that backed their rapid expansion, investment bankers believe there is still plenty of potential business to be fought over.

Japan’s megabanks embarked on a year-end fundraising spree that will spill over into 2009, despite spending much of 2008 seeming to enjoy excess capital reserves as they invested billions of dollars in foreign financial institutions. Deteriorating conditions in domestic stock markets, to which Japan’s top banks are heavily exposed, and the poor banking environment in general, mean that they are seeking to shore up their capital positions. The optimistic outlook is that the banks are raising funds in anticipation of high demand for loans in the new year. Sumitomo Mitsui Financial Group’s $5.8 billion preferred share issuance priced on December 11 was the largest deal of that kind from Japan ever, with the firm aiming to raise further funds in January. Three days earlier, on December 8, Mitsubishi UFJ Financial Group, the country’s largest banking group by assets, priced a ¥417 billion ($4.5 billion) common equity offering at a 3% discount to the share price. The group’s share price was the worst performing among Japan’s top three banks during the run-up to the deal’s pricing but the stock has since recovered.

A GDP growth rate of 8% has long been touted by Chinese authorities as well as commentators as an important threshold; should the rate slip lower, the argument runs, the slowdown might trigger dangerous social problems. Analysts at foreign banks have universally tended to avoid predicting that this might happen but an interesting trend to watch for in 2009 will be the emergence of the ‘below-eight-percenters’ if conditions in China do not improve. Early out of the gates was Qu Hongbin, analyst at HSBC, who wrote in December that while China’s Rmb4 trillion ($2.16 billion) stimulus could lift growth above 8% in the second half of the year, "weaker growth in H1 ‘09 will drag the whole year average to 7.8%". Watch this space.

Ideologically the US and Iran are far apart, but economically they are uncomfortably linked. As the US recession spurs an oil-price crash, Iran’s populist financial policies might be set to face substantial obstacles.

South Africa’s central bank cut rates for the first time in three years in December. The repo rate was lowered to 11.5% compared with an annual inflation rate of 12.4% in October. The central bank expects inflation to fall within the 3% to 6% target range by the third quarter of next year. Lower oil prices and consumer demand have helped tame inflation. However, lower gold and platinum prices have also hit South Africa’s exports.

Dubai investment bank Shuaa Capital has announced that it will cut 9% of its workforce, or 21 jobs. "Our approach to managing our expenses is driven by the reality imposed on us from external market conditions and how we see our businesses performing next year," said Iyad Duwaji, chief executive. "We have a clear plan that reallocates resources to areas where we see demand in 2009, such as the Kingdom of Saudi Arabia and Qatar, and increasing our market share in brokerage and asset management," he said. Diminishing Gulf issuance has harmed Shuaa’s revenue. Moody’s is reviewing the firm’s rating for downgrade.

Despite a collapse in bank financing lines and the export markets, the Panama Canal expansion project will be an attractive investment in 2009, according to the Panama Canal Authority.

The Venezuelan parliament has begun a process that could allow president Hugo Chávez unlimited re-election and back his bid to rule until 2021. The proposed constitutional amendment must now be read twice in parliament before it can be brought to referendum. Chávez, who came to power in 1999, was re-elected president of Venezuela in December 2006, for a term expiring in 2013. Two debates are also necessary, one took place on December 18, and the second is expected in mid-January. The National Electoral Council will then convene a referendum within 30 days.

According to a statement released after the Latin American Shadow Financial Regulatory Committee (Claaf) meeting in December, Latin American governments could have very limited access to credit in 2009. The committee, which includes former finance ministers and central bank governors in the region, fear that Latin American borrowers could get crowded out of the credit markets as the US attempts to fund its fiscal deficit of more than $1 trillion. As large volumes of US treasury bonds are issued so the Latin governments, which face financing needs in excess of $250 billion next year, will have to develop "powerful and innovative" new mechanisms to direct money back to the region, warned the Claaf committee.

President Correa of Ecuador stated that he would not pay a $30.6 million coupon on the sovereign’s 2012 bonds that were due on December 15. This move means that holders of the 2012 notes will seek an acceleration of full payments of the $510 million in bonds, and also triggered cross default clauses on its 2015 and 2030 notes. This brings the total amount of technical default to $3.8 billion.

The Eurasian Development Bank has admitted Belarus, Armenia and Tajikistan. According to the bank’s chairman, Igor Finogenov, the admission of new member states will enhance the wider geographic expansion of the bank’s investment activities. According to the founding documents of the bank – which was established in January 2006 by Kazakhstan and Russia – any country or international organization can apply for membership.

The proliferation of alternative trading venues in Europe has vastly complicated the task of achieving best execution.

The president of the European Central Bank is at the centre of the global financial storm. He knows his actions are crucial to the survival of the entire global financial system. He gives his most in-depth interview since the collapse of Lehman Brothers to Clive Horwood and Mark Johnson.

Otherwise the country faces a crisis akin to 1998.

Markets are positioned for something akin to the Great Depression. With so much doom and gloom in the air, now is the right time to buy equities.

Not so long ago, HSBC’s Latin American debt franchise could have been described as promising but limited. That’s no longer the case. As some of its rivals struggle to maintain their position in the region, the UK bank is growing new relationships fast. Unlike many competitors, HSBC is still able to offer a full range of services, including writing a cheque when needed. "In the last couple of months, a lot of new clients have been knocking on the door that weren’t before – our overall pipeline for 2009 is now stronger than it was in 2008," says Gerardo Mato, managing director, head of global capital markets and banking, Americas.

Even in tough capital markets, open only to the few, it’s still possible to craft good deals, attract new investors, bolster balance sheets and stave off disaster. For all their past sins and excesses, investment banks – the good ones at least – will prove themselves invaluable over the coming 12 months

The use of technology to create a virtual single-trading environment is well understood. But while attention has tended to focus on the front end, it is just as important to get all the links in place in the post-trade area as well.

Biggest names in European securitization research culled.

What does the future hold for Mexico’s Banamex, which Citi owns? Although the US bank claims that Banamex is important to its recovery, after its sub-prime losses, many bankers and analysts in Mexico are sceptical. Speculation is rife about the future of the bank.

This Asian crisis might not be as bad as the last one. For Amando M Tetangco Jr, governor of the central bank of the Philippines, the lessons learnt from the crisis of 1997 and the reforms that followed it mean that the outlook for 2009 is not nearly as gloomy as might be expected. Euromoney speaks to him about the challenges facing the banking sector, forecasts for growth and inflation, and lessons learnt from the 1997 crisis. It’s been a tough year by any measure, so let’s look forward. What’s your outlook for 2009?

James Garvey announced his retirement from Goldman Sachs in December 2008. Garvey’s title was chairman of investment-grade financing – a role that was given to him after the firm made syndicate and debt origination a global business run under Jim Esposito a year ago.