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October 2008

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  • The relaunch of FX futures by Ice finally provides the CME with some proper competition.
  • Saxo Bank, despite reporting increased profitability, has shed about a third of its workforce. About 300 jobs have been axed at its Copenhagen headquarters, with up to 50 disappearing in London. The bank is believed to be reviewing its operations in both Singapore and Switzerland in particular. The cost-cutting comes after Saxo embarked on a spell of rapid and aggressive expansion. Its staffing level is now virtually back to where it was a year ago.
  • Several of Deutsche Bank’s clients had problems with the pricing they were getting electronically when they have came to roll positions forward at the end of September. When these have been queried on the telephone, the prices have apparently been requoted more accurately in line with prevailing rates in the market.
  • Data provider Markit announced at the end of September that it was planning to offer free access to its daily CDS pricing data to non-clients for a limited time. It also announced that buy-side accounts that wanted to confirm index trades would be given free access to its RED (reference entity database) system – again for a limited time. This largesse follows Markit’s decision earlier this year to offer free access to RED for buy-siders that only trade lightly in the CDS market. The moves will be welcomed by the smaller, second-tier institutions involved in the CDS market that have struggled to get access to information following the credit events at Fannie Mae, Freddie Mac, Lehman Brothers and WaMu.
  • Investors who bought into the bank hybrid argument are unlikely to do so again in a hurry.
  • The outcry against and restrictions on short-selling of financials stocks were unjustified and ill-advised and will have a deleterious impact.
  • The US bank (and it will take a while to get used to calling it such) stays one step ahead of the pack through successful capital raisings.
  • The rapid and decisive intervention of European national authorities to prop up vulnerable banks might well limit the extent of European banks’ funding problems.
  • It might have been the most turbulent month in memory for global stock markets but equity capital raisings did not grind to a halt. In fact, September has seen a spate of equity raisings from banks despite, or rather because of, the fact that they are at the centre of the market’s turbulence.
  • The CDS market is trying to withstand the strain of three almost simultaneous counterparty defaults.
  • On September 29 the Dow Jones Industrial Average experienced its most severe one-day decline in history. Of the S&P index’s 500 names, just one enjoyed a share price rise:
  • Short of a radical restructuring of the banking sector, the US government bailout will prompt a market rally. However the longer-term effects will be deleterious.
  • Rightly or wrongly, credit derivatives will pay the price for failings across the entire credit market.
  • Bank failures used to be massive news. But with so many cropping up these days they have, like world records at the Beijing Olympics, lost something of their shock value. How then to judge which have made the biggest waves?
  • The US economy is far more resilient than some commentators think. The present crisis also creates an opportunity for the Treasury to help itself and many pension funds.
  • Analysts at JPMorgan suggest that prime money market funds, which had $2 trillion of assets under management in early September and are a leading provider of short-term liquidity to the banking system, suffered between $350 billion and $400 billion of redemptions after the Prime Reserve fund broke the buck following losses on its $385 million holdings of Lehman commercial paper.
  • The failure of the US House of Representatives to pass the Emergency Economic Stabilization Act of 2008 at its first reading on September 29 came despite the entreaties of the Securities Industry and Financial Markets Association to its members to call their congressmen before noon that day to explain to them why the legislation must pass.
  • The US government warned that failure to pass the Paulson plan into law would lead to disaster. In the worst-case outcome, that could mean wholesale nationalization of the finance industry. With Frannie and AIG, and a banking system that fails without dramatic Fed intervention, the Bush administration has already made a start. Peter Lee looks at alternative strategies that might prove sharper than Tarp.
  • The financial crisis has finally taken its toll on the money markets.
  • Freddie Mac is seeking to reassure holders of its debt that the preferred stock purchase agreement announced by US Treasury secretary Henry Paulson will protect them, "regardless of who wins the elections".
  • At the beginning of 2007, Euromoney wrote that the retail lending boom in the Balkans was putting pressure on the region’s banking systems and that cooperation between banks and authorities was vital. But as the world’s economic downturn pushes into southeastern Europe, that warning might be going unheeded. Jethro Wookey reports.
  • Deutsche Bank is taking a 40% strategic stake in Russian fund manager UFG Invest, one of the top 10 players in the Russian asset management industry. Under the terms of the agreement between the two firms, Deutsche will have the option to increase its holding to 100%. Deutsche’s existing fund business, DWS Investments, will be combined with UFG Invest and the new entity will be branded Deutsche UFG Capital Management. "[This] transaction further strengthens our role in Russia," says Igor Lojevsky, chief executive of Deutsche Bank Russia.
  • The flamboyant stage presence and forthright views of Kotaro Tamura are becoming something of an annual highlight at Euromoney’s Japan Capital Markets Congress, and this year the LDP senator in charge of the sovereign wealth fund committee surpassed himself during an onstage interview that at times reduced a packed auditorium to helpless, if somewhat nervous, laughter.
  • Proposals to make a settlement with hold-outs to Argentina’s defaulted bonds could raise the country much-needed funds.
  • UBS heads the Dealogic league table for investment banking fees earned between January and September this year. The Swiss bank, which was awarded the title of best investment bank in Asia in Euromoney’s Awards for Excellence 2008, took a 5% market share with $323 million in fees during the nine-month period. Citi and Goldman Sachs were second and third respectively.
  • It was not only US investment banks such as Lehman Brothers and Merrill Lynch that found themselves in dire trouble in September. In the middle of the month, Russia’s KIT Finance found itself unable to meet repo obligations and had to hurriedly find a strategic buyer to prevent itself following Lehman’s fate. According to market sources, KIT Finance failed to settle repo obligations worth about Rb6 billion to Rb8 billion ($153 million to $230 million) In the end the company was rescued by Leader Asset Management, the pension fund arm of Russian energy company Gazprom.
  • Unibanco, which has a 52% stake in Brazilian insurance joint venture Unibanco AIG, is looking at buying the remaining share of the company if it goes on sale. The unit’s president, Jose Rudge, hinted in a conference call in September that Unibanco had the first right of refusal for the 48% share. "We are very attuned to opportunities that may arise from this and would analyse the opportunity to buy if it were for sale," says Rudge, adding that this would be a natural step for Unibanco. He declined to comment on whether AIG had offered to sell, or if Unibanco was in direct acquisition talks.
  • Standard & Poor’s has begun assigning recovery ratings to the debt of 16 speculative-grade-rated Mexican corporations, as global investors are forced to place more focus on the recovery of principal after a borrower’s potential default.
  • African borrowers and international lenders need to be judicious in their approach to funding on the back of new energy discoveries.
  • The Digicel Group is planning a multi-million investment in central America in the coming year. The investment will focus on technology, equipment and customer offers in an attempt to shake up the competition in the region. Luis La Rocca, Digicel manager for El Salvador, said the company had already invested $2.5 billion in developing its network, which has more than 7 million customers.