The 2009 guide to Technology in Treasury Management (PDF)

Poor Citi. Not even sport can provide the beleaguered bank with an escape route from its woes. Just as RBS is coming under attack in the UK for spending £200 million on sponsorship contracts with top sportsmen such as Sachin Tendulkar, Jack Nicklaus and Sir Jackie Stewart weeks before it got a government bailout, Citi is facing flak for a deal with the New York Mets after receiving $45 billion of taxpayers’ money. US lawmakers have criticized Citi for continuing with a $400 million sponsorship deal for the Mets’ baseball stadium even as the bank’s future continues to be in doubt. Citi and the Mets deny that Citi Field stadium will be funded by government money, although some wags reckon the stadium should be called Fed Field.

Kazakhstan has witnessed a dramatic series of events in recent weeks as the central Asian state grapples with the growing challenge of the global credit crunch and associated economic slowdown. At the start of February it devalued its currency by 18% to about KT150 to the dollar.

As gas exports from Qatar provide the country with a buffer from the Middle East’s financial crisis, investors are expected to favour Doha over troubled Dubai. Already, some regional and global banks are transferring staff from Dubai to Qatar’s capital.

One region that will feel the force of a deep recession in the US is central America. However, recent financial reform could help soften the blow to an extent. Two of the region’s finance ministers tell Euromoney about their hopes and fears.

Given the emirate’s imploding real estate market and economy, some local banks in Dubai announced surprisingly strong results for 2008. But developments in the second half, and especially the final quarter, reduced results for the year as a whole.

"If I was Bob Diamond I’d offer to pay Fred Goodwin’s pension because if he hadn’t bought ABN Amro, all the senior Barclays guys would be out of a job"

The glitz and glamour associated with the Oscars was expected to take a hit this year. As the economic climate continues to deteriorate many thought Hollywood would want to show it was in touch with the real people who are having a difficult year – something their similarly wealthy counterparts on Wall Street have been so bad at doing.

It seems that no area of life can remain untouched in this financial downturn – not even the English language.

The current economic crisis exposes gaps at the heart of European policymaking. They will only widen as eurozone countries and the ECB grapple with the prospect of quantitative easing.

If you have nothing, so do I.

Acquisitive stock exchange operator Wiener Börse is considering a possible bid for a stake in Croatia’s Zagreb Stock Exchange, a move that would further boost its claim to be the leading bourse for investors looking for exposure to central and eastern Europe. Wiener Börse official Beatrix Exinger told Euromoney that there had not been any formal discussions about a takeover offer but added: "Generally we are interested in making strategic investments in exchanges throughout the entire CEE region and that would naturally include the Zagreb Stock Exchange as well, but there have been no detailed talks as yet."

Corporate China’s drive to secure supplies of natural resources while they are available at low prices will be a big source of investment banking activity in Asia this year, according to bankers in the region. Aside from a record-breaking January in the debt market there has been little capital markets activity in 2009. However, several multi-billion dollar deals from China in the past few months suggest that its leading companies are aggressively seeking to take advantage of their cash reserves to buy assets across the world. These deals are fraught with political sensitivities, however, and the current crop will be closely monitored by potential buyers, sellers and advisers that might be considering joining the rush.

Eirvin Knox, chief executive of Abu Dhabi Commercial Bank, has resigned. He will be replaced by his deputy, Ala’a Eraiqat. The resignation came as ADCB’s profits for 2008 fell 35% from 2007 to Dh1.36 billion ($370 million). The bank took loan provisions of Dh758 million and investment provisions of nearly Dh740 million.

Prytania Investment Advisors has hired Paul Levy as a partner based in London. Levy is an experienced structured credit banker, having worked at Morgan Stanley, Deutsche Bank and Merrill Lynch – where he was head of exotic credit structuring. Levy will focus primarily on assisting Prytania’s clients in managing the risk in their structured finance and credit portfolios, some of which are managed directly by Prytania. Prytania’s advisory business has attracted substantially greater client inquiry since Lehman Brothers defaulted in September 2008. Its financial institutional clients are looking at better understanding and managing retained credit risk, and Levy will help facilitate that given his expertise – especially in investment-grade synthetic credit.

"I hope they’re not more of the same. I hope you’re smarter than that"

The eurozone’s advantages for both strong and weak members far outweigh any disadvantages that might incline countries to walk away.

Today few banks in Europe could raise equity capital from private sources. Governments are now the leading providers and will continue to be so for some time. But Swedish banks are hoping to complete a little flurry of conventional rights issue recapitalizations this month, in a reminder of how equity capital markets used to work in the days before banks in Europe resorted to taxpayers to cover their losses.

More heat than light was generated when UK MPs interrogated hedge funds. Neil Wilson reports.

On February 15, Venezuelans went to the polls to vote on a constitutional amendment eliminating term limits for public officials, including the president. The result was a victory for Hugo Chávez, the president, with 54.3% of the electorate voting in favour of the change. The result means that Chávez could rule his country for at least another decade. In his speech after the results were announced, Chávez avoided his usual jubilant claims for sweeping economic changes, promising to focus on more immediate issues. Rampant crime, corruption and inefficient institutions that waste large sums of money are the top priority this year.

Rio de Janeiro came in a close second to New York for Madoff losses according to locals in the Brazilian city. Reports continue to emerge that despite the big losses few customers will report them because much of the invested money was undeclared. "Go to the country club in Rio and the only conversation is about how much each person has lost," says a local banker.

Despite their mounting woes, several US and European banks claim that they remain committed to Latin America, especially Brazil, according to their regional heads, although some are paring down their presence.

The recession in the US economy is beginning to bite in central America, leading to a big slowdown in remittance flows that are vital to the region’s health. Guatemala and El Salvador, in particular, are most vulnerable to a drop in the growth in money flows from relatives in the US and elsewhere.

1 trillion the yen value ($10.6 billion) of the corporate bonds the Bank of Japan says it will buy to try to inject liquidity into the stagnating market. The bank will buy bonds rated A or better held by banks in an effort to increase lending from financial institutions.

Temasek’s decision to replace Ho Ching with Chip Goodyear as chief executive raises a host of questions about the future direction of Singapore’s sovereign wealth fund.

The International Finance Corporation has teamed up with Japan Bank for International Cooperation to launch a new recapitalization fund for struggling private-sector banks in the emerging markets.

Fitch Ratings downgraded its ratings for Russia for the first time in more than a decade as a result of falling oil prices, dwindling foreign currency reserves and record capital flight. Fitch cut Russia to BBB from BBB+ and maintained its negative outlook. "The scale of capital outflows and the pace of decline in Russia’s foreign exchange reserves have materially weakened the sovereign balance sheet," says Ed Parker, Fitch’s head of emerging markets in Europe. "The downgrade reflects the negative impact on Russia from the fall in commodity prices and the dislocation to global capital markets that has left Russian banks and companies struggling to refinance debt."

As part of a government reshuffle, Hamad Saud Al Sayyari, governor of the central bank of Saudi Arabia, has been replaced by the vice-governor, Muhammad Al Jasser.

Royal Bank of Scotland is closing its operations in Kazakhstan as part of its business reorganization.

Legislation to stop coupon payments could have wide consequences.

The market is relatively young but it has had a brutal education over the past year as the financial crisis has swept through every corner of the financial markets. Where next for inflation-linked products?

"This may seem a bit cliché [sic], but ladies, head to Victoria’s Secret tonight (part of Limited brands, ticker: LTD) and pick out something as revealing as you possibly can for Valentine’s Day with your FBF. You may not want to pick out anything red, as it might remind him of the carnage in the market today, but pretty sure anything you buy will do the trick."

While corporate bond issuance in Europe has got off to a record start for the year, in Asia another trend is dominant: debt buybacks.

With Latin America’s equity markets still shut, some cash-strapped corporates will be able to turn to the debt markets to raise much-needed funds, although opportunities will be limited and only selective credits will have access.

The partly state-owned Brazilian oil company sees no conflict between profitability, state ownership and social responsibility, according to its chief financial officer, Almir Barbassa. Jason Mitchell reports.

RBC Capital Markets has hired Natasha Brook-Walters as its global head of institutional FX sales. Brook-Walters, who will be based in London, was most recently at Morgan Stanley. She will report to Ed Monaghan, RBC’s co-head of fixed income and currencies, Europe. RBC has been steadily expanding its European business over the past 12 months.

Aladdin Capital Holdings has launched a fund that will invest exclusively in debtor-in-possession facilities.

Talk that several countries have entered a competitive devaluation race is wide of the mark.

The 10 members of the Association of Southeast Asian Nations (Asean), together with Japan, China and South Korea, agreed in late February to create a $120 billion pool of foreign exchange reserves. The fund is intended to act as a buffer for members by providing short-term financing, as well as helping to ward off speculative attacks on their currencies.

Timothy Geithner’s proposals for hedge funds and private equity funds to buy the mortgage-backed assets that clog financial institutions’ books have not been met with the enthusiasm the US government might have wished for.

Just a week before Bernie Madoff’s first hearing was to take place, another multi-billion dollar hedge fund fraud case emerged. Billionaire Allen Stanford, or "Sir Allen" as he is in Antigua, has allegedly ripped off investors to the tune of more than $9 billion. Once again, due diligence experts say the writing was on the wall and that they had been discouraging investors from investing money with Stanford. The most glaring red flag was that the fund returned the same performance for two years running.

US president Barack Obama is reportedly going to propose taxing the carried interest earned by hedge fund managers and private equity managers as ordinary income, rather than as capital gains. In addition to capping Wall Street executive salaries, industry participants fear that there will be an exodus of financial expertise to more accommodating jurisdictions.

The $3 billion London hedge fund Endeavour is liquidating its flagship fund after losing more than 40% last year. The fund was running a fixed-income arbitrage strategy that lost money on Japanese government bond futures. A bail-out plan with Barclays Global Investors failed to be completed. The fund has also returned money from its second fund, Pembroke, to investors. Pembroke will continue to manage proprietary money.

The FX world looks as if it could be there for the taking for the Canadian banks, which either through good judgement or luck appear to have weathered the global credit crunch relatively well. CIBC World Markets also looks as if it wants to capitalize; the bank is rumoured to have lured Mark Sweeting to the new role of head of FICC sales. Sweeting had been twiddling his thumbs at UniCredit in London, which he joined from ABN Amro in June 2007 to focus on US and UK real money sales. In 2008 CIBC hired the heavyweight trio of Harry Culham, Christian Exshaw and Tim Carrington, who gained a solid reputation at Dresdner before an ill-fated stint at Merrill Lynch. Sources say Sweeting will start in April and report to Exshaw.

The RTS Stock Exchange in Moscow has seen good demand for its new euro/dollar futures contract, launched on February 5. Turnover in the contracts, which have a notional value of just €1,000, reached 142,565, or $1.8 billion, on February 17, making it probably the most successful FX contract launch for some time. Local banks have been providing liquidity; demand is said to be flowing in from retail participants.

Debt drought might force Gatwick sale rethink.

The new US Treasury secretary took just three weeks to disappoint those hoping he could find a way to save the US banking system and give a lead to the rest of the world. He has put off creating a bad bank to purge the system’s toxic assets but its day will surely come. There are bad banks aplenty now and when they inevitably collapse, taxpayers will pick up the mess. Peter Lee reports.

The Turkish economy has made great strides forward since the financial meltdown of 2001. But has it changed enough to survive the global economic slump? Guy Norton reports from Istanbul.

Emerging market investors who gorged on an increasing array of corporate debt products face uncertain times as companies’ balance sheets come under pressure. Default and recovery rates will vary greatly by country, writes Sudip Roy.

Bad news from equity derivatives desks to have been relatively contained so far – although banks make it hard to find real numbers. But as investors remain wary of highly structured trades, and bank losses mount, will it be back to basics in 2009? Phil Moore finds out.

Analysts predict that Spain will be hit hard by the global economic downturn. But Baldomero Falcones of conglomerate FCC tells Laurence Neville he’s confident the company is well placed to thrive.

Multibank platform FXall, which has recently released a new service called Cross Currency Netting, says that changing conditions in the foreign exchange market have shown the importance of being able to deliver flexible workflow tools to the buy side.

Analysts at Royal Bank of Canada recently summed up the prospects for many of the non-G7 economies in a piece of research entitled Running out of bullets.

If you thought the credit market was dead, it’s not. It is now called the sovereign debt market. The crisis has boosted demand for their paper, but a day of reckoning for the government bond markets is coming. Alex Chambers reports.

Hedge fund activists are finding it harder to spot opportunities.

Hedge fund lay-offs continue to accelerate. Bluebay Asset Management, the fixed-income specialist firm, laid off 30 people in February. One firm, however, is hiring heavily. DE Shaw has been advertising for an investor relations associate, a government adviser associate, a computational biochem associate as well as general staffers across several websites over February. "We’re not your typical finance firm. We hire painters, poets, and mystery novelists. We offer brilliant colleagues, flexible schedules, free food, free admission to most major NYC museums, yoga classes, and no dress code... Plus, we have a supercomputer. No matter what you’ve studied, if you’re smart, accomplished, and willing to learn, you’ll fit right in," says the posting.

Bain Capital has reportedly proposed waiving the 2% management fee on several of its private equity funds.

Credit default swaps market gets its house in order.

In Brazil, private equity is in vogue. Local billionaires Eike Batista and Andre Esteves are not the only people tapping the low valuation opportunities. Fund managers can be more selective within wider risk parameters as the true power of their key asset – cash – becomes obvious. Chloe Hayward reports.

Robert Bell and Robert Palache have formed Bell Capital Partners – a boutique advisory firm that will provided specialized financing advice in the real estate sector.

One of the smallest EU sovereign issuers is determinedly fighting its corner, as Portugal’s debt agency head, Alberto Soares, tells Alex Chambers.

The relatively conservative approaches of the financial system and banks’ customers seem to be helping the nation deal relatively well with the financial crisis and recession. But there are still risks ahead. Laurence Neville reports.

Some senior bankers are still moving to Dubai; but at least one has already moved away again. Sending rainmakers to the UAE brings as yet unquantifiable rewards. Should global banks keep expanding their Gulf presence? Dominic O’Neill reports from Dubai.

Eike Batista is intent on bucking the market. He wants to make idle private equity work. Bankers love his energy and mining businesses despite the downturn in global commodities. Can Brazil’s richest man keep delivering? Chloe Hayward reports.

UAE loan buys time and gives options – but which to take?

Global firms are once again rolling back their commitment to Asia. Will they never learn?

What good is abundant liquidity unless it flows into the wider economy?

The impact of the credit crunch spread across the world over the past 12 months. Eastern Europe was badly hit, and the Middle East and Asia could no longer claim to be immune.

Regulators see a chance to hammer hedge funds and are determined to take it.

If you are going to throw money at a problem, throw it at the right problem.

BNDES spending can only prop up the economy for so long.

Emerging Europe needs a coordinated bank bailout – and fast.

A risk manager at a large European bank now being propped up by its government after losing billions explains how the bank’s executives used to think about regulation. One question, he recalls, used to dominate its dealmakers’ meetings with the bank’s own legal counsel: “Can we get away with this?” No one ever asked: “Should we be doing this?”

Thailand’s new finance minister is doing everything he can to get the country’s fundamentally sound banks lending again. He must also cope with political instability. Will Korn Chatikavanij be able to see the job through? asks Eric Ellis.

Eighteen months ago, the chief executives of major financial firms were revered. We envied their elevated status – the jets, the bodyguards, the limousines and the layers of gatekeepers. Now these men are reduced to squirming schoolchildren who’ve been caught stealing from the communal cookie jar.

The role of treasurer must be confined to prudent funding, investment and risk management, not making a profit.