On a lighter note, we say goodbye for the time being to our resident US banker, Herbie. Herbie first started writing home to Mom in 1969. A firm believer that friends are God's apology for relations, he has spent the last 28 years based in London, as far from his mother as possible, though every faithful month his letters home have kept her, and you, abreast of the latest financial happenings. In the process he has chronicled, mocked and satirized most of the key events in the life of the modern capital markets.

The bad times are far from over for Hong Kong. The financial crisis that has engulfed Asia is continuing to put enormous pressure on the once-vibrant local banking sector. Profits are down and bad and doubtful loans have soared. But in spite of the deteriorating operating environment, bankers are scrambling to maximize existing sources of income and to identify new ones.

When Russia announced a moratorium on its debt payments and a rouble devaluation, Latin American debt traders had only one thing to say: "The markets are closed."

Russia's infamous "dark soul" is alive, if not well. In an article in a recent issue of Novaya Gazeta, Sergei Mavrodi, the architect of the MMM pyramid scheme that swindled millions of Russians out of their life savings, says that nothing would have persuaded him to invest in Russian government treasury bills (GKOs), which he calls "a low-tech version" of his own scam.

Economists and academics will long ponder why east Asia's currencies have depreciated so much. Euromoney thinks it may have found the answer - perhaps each country is trying to outdo the others for the title of cheapest currency in Asia.

What's behind Lehman Brothers' decision to form an executive committee? The news this August that the heads of the major businesses would join chief executive Richard Fuld in a six-member committee came four years after Lehman split from its marriage with American Express Bank. Ostensibly, the team is being set up to formulate strategy.

Is it a correction rather than a crisis? Perhaps, but consider this sobering list of 31 crises, prepared by Tim Bond, a strategist at Barclays Capital. His conclusion? "A western equity market crash will complete this litany of disasters ... since [equities] are mispriced by most yardsticks and since their fundamentals are daily worsening."

During the crisis in emerging markets, equity fund managers that have invested in Asia, Latin America and eastern Europe are most concerned with their exposures to specific countries. How much do they have in Russia, how much in Indonesia? According to a report by ING Barings, however, those portfolios managers may be asking the wrong questions. They should be analyzing how much they have in value stocks, how much in growth.

Brazil long needed a heavyweight in the central bank chair and now it's got one. Gustavo Franco earned his spurs in last October's Asian meltdown. His policy regime, especially the use of capital controls, is being studied around the world. Brian Caplen reports.

The appointment of David Robins and Malcolm Le May as respectively chief executive and head of global corporate finance at ING Barings reunites the two former UBS management partners whose high profile should go some way to reassuring insiders and clients about their new employer's commitment to investment banking.

Hank Paulson, appointed co-chairman and co-chief executive (to serve alongside Jon Corzine) of Goldman Sachs in June, is known for being intensely hard-working - although he says he has never prided himself on trying to work more hours a day than anyone else. A committed and active conservationist (along with his wife), he also likes to spend his holidays in the wild outdoors.

When their country was isolated by sanctions, South African banks had it easy. Now foreign competitors are eating away at their share of the most profitable business. Sam Swiss reports.

For foreigners, Japan is a topsy-turvy land where economic theory stands on its head. Nowhere more so than in the banking sector, a gravity-defying edifice which appears to be propping up the entire economy. If you were to rebuild it, you wouldn't start from here. But it has a terrifying logic, eloquently defended by Japan's elite. And remember, they wouldn't be in this mess if the Basle committee had been tougher 10 years ago. Steven Irvine reports.

European cartel watchdogs swooped on seven Austrian banks in June believing there was evidence of a price-fixing ring. Not so, say Austrian bankers, just an informal luncheon club. What's the truth? And what triggered the interest from Brussels? It's a story of Euro-politics, cut-throat competition, a little history and a tragic suicide. David Shirreff reports.

From the Silk Road, to Basingstoke, to Buenos Aires, the HSBC Group has grown into one of the most formidable names in international banking. Its recent spurt of acquisitions - which have made it the most profitable bank in the world three years running - were masterminded by the workaholic Scotsman William Purves, who gave up the role of chairman this year. His long-time deputy, John Bond, is today the taipan of a bancassurance group that grew out of the old HongkongBank founded in 1865 in a diversification strategy that is looking wiser by the day.

The words "frying pan" and "fire" spring to mind. Sitting in his office overlooking the trading floor, Alexander Knaster, CSFB's Moscow president, discusses his move to Alfa Bank, where from October 4 he will take over the newly merged commercial and investment banking operation. Though troubled, CSFB remains the market leader in almost all areas of investment banking in Russia. Knaster's new employer, by contrast, was the house bank of one of Russia's weaker financial-industrial groups. Now it is being thrown into an ill-defined merger with Inkombank and the National Reserve Bank in a desperate bid to survive.

Banks in the Middle East and North Africa generally performed well in 1997 despite hits in the second half from falling oil prices and Asian economic turmoil. Even where oil economies have successfully diversified, though, 1998 looks like being a tougher prospect. Banks in the region will therefore need to look harder at consolidation and cost-cutting. Andrew Beikos and Anthony Christofides report.

Mexican corporates are raring to go but the borrowing outlook is grim. International markets are expensive, the local banking sector weak. The big names can raise funds but may be hit because their customers are cash-strapped. By Matthew Doman.

Their mission is the same: to hunt down and execute mandates. They're all winners. Yet their tactics differ greatly, reflecting the varied cast of characters now reigning on Wall Street - tough New Yorkers, Cuban exiles, a laid-back Brazilian, an English lawyer, even a Senegalese photographer. Brian Caplen investigates the mix.

When Hotman Hutapea, Indonesia's premier bankruptcy advocate, presented his first case to the new commercial court on September 1, he set telephones ringing in bank offices all over town. "Now they believe it," says one senior banker. "They see they'd better do a deal - or else."

It's a measure of the turmoil in world markets that not a single bank was at first prepared to supply the forfaiting rates used by Euromoney in its calculation of these country-risk rankings. So fast were things changing that even these usually stable indicators became too volatile. Banks supplied them on request on a day-by-day basis to clients an indication of how difficult trade finance, the lubricant of the real economy, was becoming.

Ukraine has been pushed to the brink by Russia's financial turmoil and the government's resistance to reform. The treasury bill market needs restructuring or there will be default, equity trading has ground to a standstill, and foreign investors are counting the days until they can get their money out of the country. Theodore Kim reports.

Foreign banks are trying to sell investment-banking services in Croatia but so far with limited success. Delays in state sell-offs and corporate restructuring aren't helping. By Charles Olivier.

Outside it is a bright, warm summer's day and the narrow streets of Prague are thronged with tourists. Inside the faceless municipal building that houses the new Czech Securities Commission (CSC) the light is thick and gloomy and there is an almost unnatural quiet. It may reveal a sense of anticipation. Equally, it could be foreboding.

The price of failure is not something that traders like to contemplate, no matter how used to it they have become during the summer financial market crisis. But in the first weeks of 1999, they may be forced to confront failure on an unprecedented scale; the introduction of the euro could make it inevitable.

Could it be true that Deutsche Bank was considering a bid for JP Morgan in mid-August? Deutsche was supposedly offering $175 a share in cash, 49% above the closing price the day before. But pooled accounting is forbidden by German law, so Deutsche's capital ratios would have fallen to an unsustainable and illegal level had the deal gone ahead. And Deutsche's recent history is hardly such as to endear Morgan's chief executive, Sandy Warner, and his senior staff to a link-up.

Before he left Turkey for the US to study civil engineering at Oregon State University in Corvallis, Husnu Ozyegin bought a notebook and started keeping his accounts.

Amidst all their other problems, just how well prepared are Japanese financial institutions for the millennium computer bug? After more than a year of debate and the odd testy exchange between banking officials and information officers across the Pacific some real evidence could soon be at hand.

In an uncertain world, one thing is clear. Persistent rumours that a displeased or desperate Japan will cause financial mayhem by suddenly offloading its US government bond holdings is nonsense. This possibility is so universally reject by informed market participants that it's hard to see how it ever gained any credibility.

Only floating exchange rates will allow the world to steer between the Scylla of capital controls and the Charybdis of recurrent financial crisis and wealth destruction, argues Bernard Connolly.

Savvy sovereign issuers are rethinking the use of trustees. By Christopher Stoakes

Long, long ago, when half the world was ruled by men who still believed in state control of the economy, Poland took the gamble of letting the market decide the price of goods. That dose of shock therapy in 1989 became a model for eastern Europe. The man who imposed it became one of the region's leading economic thinkers. Now he is back at the helm of the Polish economy. James Rutter talks to Leszek Balcerowicz about history, movies and the trials of coalition government.

Profits are down, salaries are being sliced, portfolios are moving into cash, buyers are getting choosy about the brokers they use. Is it all doom and gloom? Not if you're smart. Markets that were overbroked are losing the dross: that means new opportunities for firms with good counterparty risk. And research is getting better as brokers fight to sell their services to investors. Steven Irvine sketches in the background to the Euromoney/Global Investor 10th annual Asian broker survey.

Vicious dogs and bottom-dwelling, scum-sucking creatures of the deep - and that's just what they call themselves. But don't be too unkind to the vulture funds hunting for deals in Asia, they are playing a useful role in bringing value back to a depressed continent. And they are not the only ones doing deals. Conglomerates are restructuring and western financial institutions are looking for partners. We profile a mixed bunch of Asia's top deal makers. Some are ex-soldiers, some are former consultants and analysts. One is even a leading Asian central banker

Must the IMF grow in size just to stomach the next bail-out, or should it reinvent itself as a tougher, global rating agency of countries and their banking systems? Such an IMF would not whisper advice into the ear of crony capitalists and then pay off their creditors - it would be a lean, mean agent of transparency and would deal out pain where pain is due. James Smalhout reports.

The men charged with sorting out Korea's sickly, debt-laden corporate sector are making many of the right noises, but old habits are proving hard to break. A year after they went bust, Kia is still churning out cars and Jinro is still brewing the nation's favourite tipple. Jack Lowenstein reports on the dangerous brew of nationalism, legal failings and bureaucratic intransigence which is preventing Korea Inc from getting back on its feet.

Eugene Black argues the case for an alternative method of funding the IMF that would enable it to tap the private markets and reduce the need to return to member states for additional funds.

How do you wean crisis countries away from official bail-outs onto private funding? There has to be a way to reward borrowers for improved behaviour yet punish lenders for piling in indiscriminately. New lending models include contingent repos, sovereign default options and credit spread bonds. But will they catch on? James Smalhout reports.

From time to time Romania's political leadership launches a plan for reform. Foreign bankers and investors respond with a wave of enthusiasm about the country. Then things go awry. This year, following the latest reform plan, foreign banks are starting to expand outside the capital and are looking for privatization mandates. Will things be different this time? James Rutter finds out.

Who's best at it? And which houses in the next few years will challenge those at the top? It means covering sectors not countries, and convincing 40 big fund managers that you have better information. Easy. Antony Currie reports.

Brazilian banks continue to dominate our annual ranking of Latin America's biggest banks. But some smaller institutions top the ranking by capital, assets and profit growth, while Banespa has by far the highest return on equity. Data for the Latin 100 is supplied by Fitch IBCA.

Economic projections: Methodology

The crises, first in east Asia, then on the doorstep in Russia, have side-swiped Central Asia but the downturn is not without hope. Kazakhstan is pressing on with reforms despite the slide in commodity prices, and opening up to foreign banks. Uzbekistan may be stuck in a time warp, but Azerbaijan shows new signs of offering value to foreign banks and investors. By Suzanne Miller.

World stock and futures exchanges are in a turmoil of change and uncertainty. Fusion and cross-border linkages are in the air. Regulation to take account of this rapid change lags far behind, and stateless, borderless trading facilities may soon make it impossible. Remember, the only reason for an exchange to exist is to reduce transaction costs, argues Ruben Lee. Any new step that doesn't will end in tears.

Who is surprised by the savage way markets have punished politicians, bankers, speculators and economists? The structure of financial markets needs a rethink. Our cover story tears them apart as follows:

Pedro Luis Uriarte's timing on emerging markets seemed brilliant. The CEO of Banco Bilbao Vizcaya, Spain's second largest bank by assets, scaled back in Asia and Russia ahead of the crises. But will his luck hold in Latin America? In the last three years BBV has invested $3 billion buying stakes in banks and financial institutions in 12 Latin countries with major deals in Brazil and Chile sown up recently. Uriarte, whose mantra is shareholder value, aims to compensate for lower margins in Europe by reaping higher returns in Latin America. If he succeeds, BBV may rank among the world's top 10 banks by market capitalization. But the risks are high. Since the emerging markets storm blew up, BBV's share price has fallen 25% and rating agencies have put it under review for a downgrade. In an interview with Brian Caplen, Uriarte is adamant that the bank's Latin earnings will be unaffected. He speaks about the bank's acquisition strategy in Europe, his management style, his relationship with his chairman, Emilio Ybarra, and his wish to retire before the mandatory age of 62 Uriarte is 55 and became CEO in 1994. He has worked at the bank since 1974 taking a four-year break in the early 1980s to be minister of economy and finance for the Basque regional government.

The free market doesn't work. The emerging markets are crying foul. Global capital has been rampaging through their economies with dire effects. The most extreme case is Malaysia, prompting Mahathir Mohamad, that country's populist demagogue, to declare that "the free market has failed disastrously".

Singapore has fared better than its neighbours since the onset of the Asian crisis. But its financial authorities recognize that the situation could worsen. Measures to support corporations have been introduced and there has been an intensification of efforts to make the island a major financial centre, including market liberalization and an encouragement of banking consolidation. Gill Baker reports.

Slovenian banks are among the most protected in Europe. But a new banking law and reforms linked to the country's accession to the EU will shake them up. Charles Olivier reports.

You can't keep a good man down. So Andre Lee has set up his own firm, 01 Inc, in Seoul. Lee, who ran failed investment bank Peregrine's fixed-income side, is credited with single-handedly created the Asian debt markets. When Asia melted down, as did Lee's bonds and Peregrine, he looked much less visionary .

Silicon Valley investment bankers have one burning question: What's the next move for the "technology mafia" - the dozen or so influential hedge and mutual funds that turned technology issues into Wall Street's new blue-chip stocks?

When Germany's federal election takes place on September 27 the miracle of chancellor Helmut Kohl's winning in 1994 against all predictions won't be repeated. There are good reasons why. Germany's economy may be picking up, but domestic demand recovery is tentative. During 1997 the rebound was export-led, and although the domestic investment cycle is turning up, household spending remains flat at best. At 10.7% unemployment is still too high and much of the recent job creation has come from government-sponsored schemes, especially in the eastern Länder where Kohl's ruling Christian Democrats (CDU) remain deeply unpopular.

Last National Bank of Boot Hill, Moorgate, London EC2

They remain small and vulnerable to outside shocks, but the Middle East's stock markets have grown substantially over the past few years and, as Alex Mathias reports, are attracting a broader range of investors. Research by Luciano. Mondellini

You've heard of America's forty-niners, well these are the ninety-niners, preparing for the gold-rush when Europe's single currency rolls into play in January. A frenzy of asset-allocation has already started. With a single interest rate, corporate bonds will begin to outweigh government issues, equity markets will take on new importance, and cross-border competition will drive M&A. Peter Lee reports.

For a system that supposedly conquered the world in 1990, free-market capitalism doesn't look so good any more. After Mexico, Thailand, Korea, Indonesia, Russia, which of capitalism's self-appointed disciples will stumble next? And who is to blame? The track record has embarrassed all but hard-liners into thinking there might be a Third Way - between free capital flows with floating exchange rates and the dirigiste controls of the 1960s. Chile, China, James Tobin - they've all been held to ridicule for their batty market ideas. But today it's not just bleeding-hearts and socialists who are looking at their attempts more closely. Michelle Celarier reports.

Type of deal: attempted purchase

Imagine the volume of issuance if German mortgage banks were allowed to securitize their home loan portfolios. What if Germany's big commercial banks could turn their loan books into CLOs and sell them to bond and commercial paper investors? Well now they can. German banks will issue Dm20 billion in asset-backed securities this year. As Euan Hagger reports, the market should get much bigger.

It finally happened. After lurching from crisis to crisis - muddling through with partial reforms and quick fixes - Russia has finally crashed out of orbit. So who is to blame? Ronan Lyons looks at the key actors in the drama. Who are the seven oligarchs and were they behind the decision to devalue? What was really happening in the governments of Chernomyrdin and Kiriyenko? And what was the role of the IMF and western investors?

Euromoney lost a great mentor and friend on September 1. Vere Harmsworth, the third Viscount Rothermere, died unexpectedly at 73.