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November 2001

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  • Michael Dobson should have an interesting time turning around Schroders.
  • The US economic recovery will be delayed by the terrorist attacks of 11 September and anthrax scares. But in the wake of the US administration's massive monetary and fiscal policy boost since that tragic day, a V-shaped recovery in 2002 is now likely.
  • Deal: Merger of technology platformsStructure: MTS buys 15% stake in CoredealResult: New corporate bond structure – CoredealMTS
  • Heavily influenced by Washington, international financial institutions may be irresistibly drawn in by the US-led coalition's war on terrorism. Their performance was already under scrutiny. Now it's likely they will favour countries that are strategically crucial, paying less heed to their records in economic governance and financial sector reform. Shrinking private capital flows to emerging markets may allow the IMF and World Bank to regain some lost prestige. But if they lend to uncreditworthy coalition partners, private creditors may not follow.
  • On October 9 representatives from three of the leading international cash management banks sat down with treasury officials from three leading international corporations to discuss the key issues of the moment: reviewing contingency planning for any future disruption to the payments system, moving onto internet technology and reducing errors in simple payments processes. While the banks feel they must invest heavily in technology to stay in this game, the corporates can’t see why they don’t share these costs and concentrate instead on getting the basic services right.
  • Within days of the EC unveiling proposed conditions on the merger of SEB and Swedbank, the banks called the marriage off. Had Brussels scuppered a sound deal, or were the fainthearted suitors getting cold feet anyway? The row hinges on the commission’s curious focus on the dominance the new combine would have boasted in its modest domestic market, not the European market as a whole. Critics argue this discriminates against smaller EU states and will curtail cross-border bank mergers.
  • Monitoring thousands of accounts payable and receivable flowing daily through myriad bank accounts, while minimizing short-term borrowing costs and maximizing returns on investment of liquidity, is a huge challenge for corporate treasurers. They value highly banks that do this well. But Euromoney's poll shows few banks excel.
  • It is all very un-Russian. Strong growth and a burgeoning trade surplus mean Russia is flush with money, money that would have been squandered in the past. But for once the government is thinking ahead.
  • By netting more of their transactions internally, the world’s largest banks are transforming customer relationships and process capability into competitiveness and profits. They may take business from exchanges and clearers and it is possible that they are embarking on a course that could reshape Europe’s securities trading infrastructure.
  • Washington's pressure on banks to crack down on illicit money will impel fearful bankers into still tougher surveillance. To the tangle of checks on money laundering and flows to tax havens must now be added the hunt for often legal money flowing to what are deemed illicit activities. Banks face a huge reputational risk. But the extent to which they can take on policing roles and take initiatives to avert crime remains highly contentious. Neither the technology nor systems exist to make tracing tainted cash straightforward. So is the ultimate answer creating more vigilant, yet less commercial, corporate cultures?
  • When the world tipped deeper into recession on September 11 it found that Turkey was already there deep down in the hole – a recession veteran. Assisted by the IMF, Turkey has been trying since 1999 to overcome its worst economic crisis since the Second World War. It has had little success. Its support for the US means more funding is likely, but funding alone can’t solve Turkey’s problems.
  • Australia's largest domestic bank is struggling to establish a place for itself on the world stage. National Australia Bank (NAB) is presently the largest foreign acquirer in the UK domestic market. However its plans for UK expansion have suffered a setback after losses with its US mortgage-servicing subsidiary, HomeSide.
  • Author: James Smalhout
  • Akbank, emerging on top of Turkey's banking crisis, has embarked on a plan to professionalize its management. As it outgrows its family origins, Atbank prepares itself for a joint venture.
  • Engin Akçakoca, the new director of Turkey's banking regulation and supervision agency, takes on the challenges of reforming the Turkish banking system, which is suffering from a deficiency of capital.
  • The mind-set created by the myth of a recession-proof new economy proved a disastrous preparation for the sudden sharp downturn in the world economy. Rattled US corporates have been blaming their poor figures on the American terrorist atrocities. Admittedly certain sectors have been hard hit, but none of them had been in rude health before. Nonetheless the outrages will now be a catalyst for further economic deterioration.
  • Confidence in Russian banks is returning and funds are springing up to try to draw billions of dollars stuffed under Russian mattresses into the financial system.
  • Author: Julian Marshall & Julie Dalla-Costa
  • In the wake of recent events, bankers and their lawyers need to be much more aware of the need to balance effective legal compliance with a respect for client confidentiality.
  • Bankers are selling hard the story of Russia’s return to the Eurobond market with City of Moscow’s latest foray. Yet investors need to be cautious given the republic’s recent debt history. The queue of credible issuers is far from endless and likely to be trimmed by the Russian government as it prepares for its own refinancing in 2002.
  • Issuance is down in the medium-term note market. September's terrorist attacks have left the market nursing its wounds. Fears about liquidity and concerns about widening spreads have persuaded many issuers and investors to stay away.
  • A partial recovery in US equity markets looks promising. However, as bad economic news flows in there’s still uncertainty on the broader question of whether a market bottom has been reached. Bond yield curves suggest a different story to conventional equity wisdom, which implies investors should now be positioning themselves in mid-recession for a market upturn.
  • "Why do car companies sell different models?" posits a banker. "They hope that by diversifying what they sell they'll capture a bigger audience and reduce their overall cost of funding." And so it is with the new French issue linked to the eurozone price index. "This is another product range in the shop window," he adds.
  •'s second annual internet awards went live on our website on November 1.
  • In a period of uncertainty, Pfandbriefe ought to flourish. Yet the German mortgage bond market is still slow, hit by adverse swap market conditions and credit concerns springing from radical restructuring among the German banks. Even so, rival breeds of covered bonds in France and Spain are doing well. And Ireland aims to create a superior legal framework to put Germany in the shade. Could this rivalry give covered bonds a much-needed shot in the arm?
  • On his recent state visit to the US, Mexican president Vicente Fox bathed in the warm glow of Mexico's new friendship with its northern neighbour. George W Bush tried out his Spanish and everyone else agreed that ever-closer economic ties between the two nations were the new future for Mexican economic growth.
  • The International Finance Corporation, the World Bank's affiliate for private-sector investment, could be ripe for an infusion of new capital, as World Bank president James Wolfensohn recently signalled (Euromoney, September 2001). There's just one catch. Key players among the 186 member governments that are the IFC's current shareholders - the G7 in particular - have been in no mood to contribute new funds.
  • When the largest brokerage firm in America sends an email to all its employees offering them voluntary redundancy, it's a sign that something more than a periodic bout of investment banking blood-letting is under way.
  • Paul Martin, chairman of the G-20, speaks on the dangers of hosting global economic summits in light of the new wave of terrorism. He also talks about the upcoming conference in Ottawa, trade finance, and the economic side of the war on terrorism.
  • Michael Dobson should have an interesting time turning around Schroders.