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May 1999

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  • Arab banks used to be content to stick to their lucrative national markets. But with oil prices low, times are getting harder in the Middle East and banks are positioning themselves to go regional. Darren Stubing reports.
  • Which bank has the best connected external directors? Steven Irvine presents the first ever ranking of this often neglected weapon in the competitive armoury.
  • Gordon Brown, UK chancellor of the exchequer, speaks to Nick Kochan about the birth of the euro, tax competition in Europe and rethinking the world's financial architecture.
  • When Wim Duisenberg announced a 50 basis point cut in the European Central Bank refinancing rate from 3% to 2.5% on April 8, he made every effort to pre-empt speculation about more such cuts for the foreseeable future. Throughout its first three months of operation, the ECB has had to endure endless pressure from European politicians and private-sector economists to cut interest rates. Having frustrated this critical audience by keeping rates stable in the face of sharply declining business confidence in the three largest economies in euroland Germany, Italy and France Duisenberg now surprised the markets with one swift, deep cut. And his message was: "This is it." Don't expect any more cuts in the near to medium term.
  • Could El Salvador, a country of 6 million people, be about to steal a march on its larger Latin American neighbours?
  • The race towards a pan-European exchange speeded up on March 11 when Borsa Italiana, the Italian stock market, agreed to cooperate with the Paris and Swiss bourses in their effort to create a single market for the new century.
  • The volume of money raised by European private equity funds continues to grow. Much of that money is flowing in the belief that continental Europe is close to developing the sort of buy-out and start-up culture which has long produced spectacular returns for venture capitalists in the US. In late March Apax Partners closed a €1.8 billion ($1.9 billion) pan-European fund. It has the distinction of being the largest private equity fund for Europe denominated in the new currency, but it joins an already large pool of funds, much of it denominated in dollars, which is dedicated for investment in private European companies.
  • The Germans are at it again. Amid a big diplomatic punch-up, the Basle Committee on Banking Supervision failed to release its long-awaited consultation paper on credit risk control and capital adequacy on April 9.
  • Sicily's wait for money is over. The regional government found itself nearly L1.7 trillion ($1 billion) late last year and over 40 banks refused to lend. Nor was there interest in a local bond issue.
  • Who is Alice in euroland? Is it the average euro-punter watching his assets disappear down a deflationary rabbit hole? According to Willem Buiter, Cambridge economics professor and a member of the Bank of England's monetary policy committee, the white rabbit is the European Central Bank (ECB). It's operating on flawed principles, he says in a paper, Alice in euroland, published by the Centre for Economic Policy Research (CEPR). Hoping that his criticism will be constructive, he recommends the ECB should have greater accountability – publishing its minutes and answering to a parliamentary/judicial committee – and a smaller governing council and executive board, so it can act more promptly. Above all it should have the role of lender of last resort, so that, like the US Federal Reserve, it can stand behind the currency and, implicitly, support the major credit institutions when they're strapped for cash.
  • David Bowie's done it, European soccer clubs have done it, even British pubs and motorway service stations have done it. Now it's the turn of waxwork models.
  • There could be few clearer indications that foreign banks are smoking out the locals in the Japanese capital markets than Citibank's success in syndicating a $5 billion loan for Japan Tobacco.
  • A revolution in securities settlement will make Emu and Y2K look like child's play. And it will be the death knell of custody as we know it. Increasingly, custodians see their business as information, not safe-keeping. Meanwhile the consolidation continues. James Rutter reports.
  • The pie may be getting smaller but the top players are taking bigger slices. However, as Jack Dyson reports, the largest foreign-exchange firms are having to work ever harder to carve out a point of difference in a mature market with thin margins. In our eagerly-awaited annual foreign-exchange poll, Citigroup stays ahead of Deutsche by a whisker. Research by Rebecca Cicolecchia.
  • Former head of the European Monetary Institute Alexandre Lamfalussy has lent his name as chairman of EuroMTS, the euro benchmark government bond trading system that started trading on April 10, because he strongly believes in what it is trying to achieve: a liquid, efficient and transparent market in euro government bonds. The ultimate prize is the establishment of the euro as a reserve currency to match the dollar. "We've seen an accelerated move to a market-centric system from the bank-centric system that has tended to prevail in Europe," Lamfalussy said in London last month. "I have no doubt that a market-centric system is more efficient, but there's a question whether it is stable." The key to stability, he concludes - for the pricing of corporate as well as public debt - is a liquid and transparent government debt market.
  • Issuer: Jazztel
  • The prospect of sovereign bond defaults in emerging markets has focused attention on the legal documentation. Christopher Stoakes explains why.
  • Why did Morgan Stanley Dean Witter decide in January to move the irrepressible Riccardo Pavoncelli from head of European debt capital markets to head its European media industry group.
  • It is flattering to be remembered by Paul Roby so long after the event (letter, "Begging to differ" April, page 13).
  • Since Russia and LTCM, risk managers have been searching for a better way to value financial firms and the risks they run. Amazingly, they and their regulators temporarily lost sight of an important relationship - between financial assets and the way they are funded. David Shirreff reports on a meeting at the sharp end of firm-wide risk management
  • Information technology is the catch phrase of the moment. The issues surrounding Y2K, the introduction of the euro and spread of the internet are the bread and butter of an ever-expanding industry. They are also the daily bread of the key figures we invited to participate in our roundtable. What are the new challenges they face and how did they solve the old?
  • If one institution best demonstrates the effects of the Asian and Russian crises on a bank, ING Barings is it. It's a salutary tale of billion dollar losses, of individuals left to go their own way at the expense of group strategy, of management failures. Now ING Barings has one last chance and it's down to two men to turn it round. Nick Kochan reports.
  • We know that the cloggies of ABN Amro and ING Barings are deadly rivals the world over and eat each other's client lists for breakfast. In Almaty, Kazakhstan, that competition extends to the bankers' leisure time. And these aren't even Dutchmen, they're Kazakhs. They issue mad challenges to each other: downhill racing, skeet shooting, computer warfare, it's all in a day's fun.
  • This year's splurge of big M&A deals have upped the pace in the race to be Europe's top M&A adviser.
  • ABN Amro's ebullient new chief financial officer was known by colleagues at the Dutch central bank as "Turbo Tommy" for the speed with which he got things done. "His greatest strength is his social intelligence," says a senior central banker. "He's also always open to new concepts and new approaches. If he has a weakness, it is that when he delegates, it is often to himself."
  • M&A: Europe plays the takeover game
  • French banking has arrived at a turning point. In the past the government would have stepped in to resolve the takeover battle between Société Générale, Paribas and Banque Nationale de Paris. But this time it looks likely that shareholders will determine who triumphs. Rebecca Bream reports.
  • How do you combine a career in structured finance with trips to the Cannes film festival and seats at the best soccer matches in Europe? Dorian Klein, managing director of European structured finance at Merrill Lynch in London, makes it part of the job. For the past year and a half his team has worked with intellectual property rights, pulling off a major film rights securitization last year.
  • It's not just the tragic events in Kosovo that are hitting the economies and financial assets of central Europe. The current state of the European Union isn't helping either. It's ironic that, just as central Europe's reorientation towards the EU once underpinned its post-communist revival, it's now proving to be its nemesis. Slow growth in the EU this year means big external financing gaps for Poland and Hungary. Germany, which accounts for around 30% of the region's exports, is crucial. But the collapse of demand from Russia, which accounts for another 5% to 8% of exports, doesn't help.
  • Is the tide about to turn for the Nigerian Stock Exchange (NSE)? With major companies trading at very low P/E ratios, and with prospects of greater political stability, surely this is an emerging market that has been too long overlooked? Nigerian Bottling Company managers seem to think so. In March NBC did a N3.5 billion ($38 million) rights issue, Nigeria's largest ever.