Banks measure credit and market risk because they can, not because these are the biggest risks they face. Operational risk is larger, more dangerous and no-one knows exactly what to do about it. Mark Parsley looks at banks' first faltering steps in this area

Financial crises have a habit of hitting where the world least expects. No-one predicted that disaster would strike Barings in Singapore, the Mexican peso, Daiwa Bank, the copper market, Morgan Grenfell Asset Management ­ to mention only the worst debacles of the past year. So where is next? Euromoney writers identify some possibilities. A crash in credit cards? Gridlock in foreign exchange settlements? A catastrophic loss of confidence in Hong Kong after the handover to China? First, Brian Caplen reports on the results of brainstorming with forecasters and analysts and highlights some dangers ahead

Next year's IMF/World Bank meeting will be held in Hong Kong, by then three months into Chinese communist rule. What will delegates find: a thriving boom town or a ghost of its former self? Confused local opinion suggests things could go either way. To get a view from the top, Steven Irvine sounded out more than 30 of Hong Kong's tycoons, politicians and bankers, and drew some far-reaching conclusions

It's the job of senior managers in banks to identify, worry about and make contingency plans for future shocks. Brian Caplen asks two of them how they do it

Ask any central banker what is his worst nightmare and he's likely to say one word: Herstatt. Herstatt means gridlock in the world's financial system as hundreds of banks, which yesterday trusted each other to make payments, no longer do. What can shatter that trust? A technical snarl-up, a political shock, or worst of all, the sudden failure of a major bank. By David Shirreff

Despite measures by some governments to curb expenditure, withdeflationary effects on economic growth, the health of Arab banks remains good.Banks from the Gulf Cooperation Council states, particularly Saudi Arabia and Bahrain, continue to dominate the top 100 rankings. Martin Gallagher and Andrew Ioannou analyze the latest results.

Mexico, Brazil and Argentina have adhered to their structural reform programmes despite the side-effects ­ on growth and employment ­ in order to maintain investor confidence. But, David Pilling argues, high financing requirements could still lead them into difficulties. A sudden outflow of capital might result in default

The new dawn in South Africa is not an unmixed blessing for its banks. They now have to face foreign competitors muscling in on a sector they previously monopolized. But with their strong networks and increasing overseas resources, local banks are finding that alliances with foreign institutions can be mutually beneficial. Bruce Cameron reports

On his first day as treasurer of the World Bank ­ March 1 this year Gary Perlin was winding up a trip to China, the bank's biggest borrower. By contrast, the first overseas trip of his predecessor Jessica Einhorn (now promoted to managing director) was to Japan, the biggest investor in the bank's bonds.

Antonio Fazio, governor of the Banca d'Italia since May 1993, has steered the Italian economy towards low inflation and further enhanced the central bank's reputation for independence.

Foreign investors are piling into Korea's stock market. But why? The country seems to have lost its competitive edge, the stock index has plummeted, and the country's corrupt practices have been exposed with the guilty verdicts on two former presidents. Overseas investors, however, are undeterred. They believe profits are there for those who can stomach the roller-coaster ride

Pakistan's successful private power initiative has helped overcome an electricity shortage but has created a foreign exchange burden. The government is gambling on increased capacity leading to greater consumption and higher productivity. But will this be sufficient to pay for imported fuel and the tariffs charged by the foreign-owned power stations? By Philip Eade

by David Roche

Edited by Brian Caplen

Brazil's privatization programme has been given a new lease of life. With no fiscal constitutional reform in sight, the government has accelerated the sale of the biggest public utilities as the best way to downsize the public sector. And that's vital if the Real Plan is to stay afloat

Brazil's finances are being taken in hand. But fiscal reform depends on constitutional changes, and so far president Cardoso hasn't fulfilled any of his promises. The team implementing the Real Plan for recovery believes some measures can be taken without a battle in congress, but these ideas are still on paper. Although inflation is down, external investment is up and privatization has sped up, the markets will give Brazil only so long. Danielle Robinson reports

Which banks do users of the capital markets like best? And which are most respected by their peers? Our annual poll has the answers. Research by Rebecca Dobson.

Edited by Steven Irvine

Korea has been negotiating to join the OECD. But the country's financial structure is still partly shackled, despite reforms in recent years. And president Kim's call for Korea to accept globalization has not been welcomed by many of his compatriots involved in finance and business. They believe opening the country's fragile financial markets to foreigners too quickly will create instability. Andrew Horvat reports

Italy's almost 1,000 banks are the least profitable in Europe and depend heavily on traditional loan income. Consolidation of institutions and diversification of products is seen as inevitable, particularly if further privatizations are to succeed. Philip Moore reports on the problems and progress of reconstruction

The watchdog of corporate governance has been let loose in the bearpit of Russian companies. But like old bears, Russian companies can be stubborn and bad tempered ­ and they don't like anyone getting in their way. Rupert Gordon-Walker reports

Last National Bank of Boot Hill, Moorgate, London EC2

Slovenia was in economic pole position in eastern Europe when communism collapsed in 1990. But it has now fallen behind its neighbours, held back by lack of investment and political uncertainty in the former Yugoslavia. Many companies are 60% owned by management and employees, and often do not welcome outside investors. The investment companies formed to buy into privatization have disappointed, with few taking a positive approach. This could be starving Slovenia of much-needed funds. Gavin Gray reports

In Euromoney's semi-annual ranking of country creditworthiness, the winners are the emerging countries of east and central Europe. But south-east Asian economies and even Japan ­ are looking riskier, as debt ratios worsen and monetary instability spreads. Commentary by Rebecca Dobson.

Over the past seven years Polish companies have had to restructure to survive. New accounting rules have helped improve the quality of management. And Polish workers have begun to understand that foreign investment brings with it security and new technology. By Graham Field

Komarovsky and Ingersoll sit at the feet of Wall Street's self-styled literary genius

Competition in French banking is distorted by an outdated legal framework. French banks need to be downsized and made more profitable. Their returns on equity and cost/income ratios are deplorable. Strong statements. But those aren't Euromoney's views, they're the views of Marc Viénot, chairman of one of France's biggest banks, Société Générale. He spoke to Felix Salmon

All over Europe, banks are counting the cost of preparing for the single currency ­whether their home country is "in" or "out". Apart from buying new bank-wide technology, they face a loss of trading revenue and a threat to their corporate client base. Not to mention the thought that it may never happen. Peter Lee reports

Over the past year, Roberto De Ocampo has more than vindicated his award of 1995's Euromoney Finance Minister of the Year. He goes from strength to strength, as part of a team under President Fidel Ramos that has brought the Philippines from being the sick man of Asia to become one of its star performers.

The next cycle of sovereign debt default will be different from the last. Lawyers hope that the mechanisms for coping with it will have evolved as well. By Christopher Stoakes

The concept of shareholder value is transforming the way Hungarian companies communicate with investors ­ at least it is for the 50 or so companies traded on the Budapest Stock Exchange. By Henry Copeland

The world's big borrowers have found a new source of super-cheap funding. In the past year, a group of small, hitherto almost unheard of Japanese institutions ­ most famously the Teachers' Pension Fund ­ have bought as much as $100 billion of structured Euro-MTNs. So desperate are these investors for certain types of securities that a top-rated borrower can raise funds via a private placement in Japan for as little as Libor minus 60 basis points. Garry Evans explains how

Robert Rubin, secretary of the US treasury, has faced tough situations and made tough decisions. In a remarkably short time, he dealt with the Mexico crisis and put the dollar back on course, demonstrating a rare grasp of both domestic politics and global markets. By Katharine Morton

Watch out! A hit squad of World Bank auditors could be making a surprise visit to a project near you. This is the Bank's first serious attempt, led by president James Wolfensohn, to address corruption head on. But nailing the culprits ­ some of them dictators and governments ­ is not so easy. By Michelle Celarier

The Philippine government is recruiting the private sector to develop and upgrade the country's infrastructure. But how will the private sector raise the financing it needs on the international capital markets? By Maggie Ford

Managing director and head of fixed-income trading and sales, West Merchant Bank Limited

Edson Mitchell's bold attempt to turn Deutsche Morgan Grenfell (DMG) into a world-beating bond house has made headlines in the past year. He has employed about 500 new staff -­ including many from his old firm, Merrill Lynch -­ in little more than 12 months. But until now Mitchell has shied away from talking publicly about his plans. Here, for the first time, he reveals what his aims are -­ and how he's going about achieving them. Mitchell spoke to Garry Evans

Bernard Connolly, whose critical book The Rotten Heart of Europe lost him his job at the European Commission, continues to write unwelcome truths about the Maastricht Treaty and "Euroland" after January 1999. Here, he looks at the future of no-longer-sovereign government bond markets. Good news for Italy, bad news for Belgium.

Peter Lee and Steven Irvine