Source: www.breakingviews.com is Europe's leading financial commentary service

With Islamic banking business growing faster than more conventional financial services, competition to provide new products is heating up.

An embarrassing and potentially damaging controversy is emerging in Islamic equity funds. Because of the way the vast majority have been handled by mainstream brokers, many may not be as Shariah-compliant as investing customers would expect.

In the wake of September 11, the US authorities targeted informal financial networks serving people in the Islamic world for particularly severe treatment. One of these was called Barakkat, a cash-transmission network that linked expatriate Somalis living in the US with their impoverished home country. Barakkat was closed down less than a month after the outrage, causing enormous stress to the large expatriate Somali community in the US and their families in Somalia.

After a weak 2001, most Arab banks enjoyed little pick-up in their fortunes in 2002. However, early results in 2003 suggest that the tide may be turning.

Debt capital markets is one area of European banking that is hiring rather than firing. But most of the new jobs are at banks still building a presence, and it is only skilled, experienced staff that they are after at modest cost.

Barbados

The emerging-market bond bubble may be close to bursting as the US economy shows signs of picking up and bondholders digest a recent rise in yields. It means investors will have to dig harder for opportunities in the CEE region.

Royal Bank of Scotland is beefing up debt headcount aggressively. In its fixed-income division, RBS Financial Markets, staffing was up 25% last year. This year it aims to accelerate that growth. If it is to fulfil its ambitions to grow from a strong sterling and loan house to a broader business in euros and dollars, it has no choice but to recruit fast.

The murder of prime minister Zoran Djindjic and the ousting of central bank governor Mladjan Dinkic hurt Serbia's free-market reforms. Now the government's hopes lie in privatization.

Emerging markets are back. That's the conclusion of the latest quarterly debt survey by Emta, formerly the Emerging Markets Traders Association. In the second quarter of 2003, total emerging-market debt trading passed $1 trillion for the first time in five years.

THE CEO OF a leading investment bank recently offered Euromoney a telling judgement on the state of the sector. "There is now more talent outside the industry than inside it," he noted, reflecting on the exodus from the big banks of some of their brightest and most successful people.

Saudi Arabia is making progress in restructuring its economy, but keeping up to speed a move away from dependence on oil itself rests on high oil prices and low interest rates.

Banking talent is always newsworthy, especially when it is unearthed in a dimly lit bar and involves Elvis renditions. The bar, in London's Canary Wharf, is a haunt of Gareth Jones, a salesman at BNY Securities. The event was the inaugural public gig of The Dealers.

Bangladesh

Source: www.breakingviews.com is Europe's leading financial commentary service

David Mulford, chairman of CSFB International and long-term friend of the banks, is set to follow such luminaries as JK Galbraith by becoming US ambassador to India. If his past is anything to go by, expect India to do a billion-dollar debt swap within months.

Latin America's poor economic performance in the past decade has overturned analysts' judgements that getting rid of the region's dictatorships and introducing free-market reforms would clear the path to sustainable economic growth.

Ibrahim bin Abdulaziz Al-Assaf, Saudi Arabia's minister of finance and national economy since 1996, has steered the economy through a difficult period. He has played a leading role in the modernization, diversification and liberalization of the Saudi economy and managed its finances prudently in a period in which oil prices have swung between $10 and $30 a barrel. Al-Assaf, a 54-year old economist who has served as the country's executive director at the World Bank for six years and as vice-governor of the Saudi Arabian Monetary Agency (Sama) and wins Euromoney's finance minister of the year award for 2003, spoke to Nigel Dudley in his office in Riyadh.

Banks reported strong results for the first half of the year, so it seems odd that senior executives at US banks are so concerned about stagnant revenues. It has been an issue for two years, but there were ways of getting around it. First came cost-cutting. Then revenue from the consumer sector held up, with sustained buying and remortgaging of houses, and spending on credit. Third was what banks call yield-curve plays and the rest of us proprietary trading.

A cabinet reshuffle should revive Saudi Arabia's economic reforms, with a new capital market law pending.

After falling out with the US over access to Iraq, Turkey is regaining favour with the west as its economy revives. Its long-term goal is EU membership, but how far away does that target remain?

Advisers: UBS (Cordiant); Goldman Sachs (WPP)

What are the defining traits that good investment bankers share? Energy, creativity, entrepreneurship, willingness and ability to take risk, the strength of intelligence to form independent views of the world and the courage to back them: all traits that tend to be driven out of people when they become institutionalized within large organizations under cynical leaders. Everyone toiling at the coalface in a large bank should take lessons from the stories that follow of those who have quit to set up on their own. There's never been a better time to do it.

The bulk of corporate earnings results for the second quarter of 2003 from S&P500 companies are now in and equity bulls are claiming that they justify the sharp equity rally since mid-March. I'm not convinced. More companies beat analysts' expectations, but then estimates had been revised down sharply.

There can be a hefty difference between perception and reality on debt markets pay these days. One headhunter recalls: "A senior banker called me when I was on a ski lift at Christmas. He said he was going to get only $1 million in the current bonus cycle. He wanted to know whether he had been hard done by as he thought he was worth $2 million. I got a researcher to check what someone in his position and with his job title would usually earn right now. I called him back and said 'you're worth $600,000, so you're doing well'."

Investors in the US need to decide which numbers to believe. Typically, statistics such as unemployment or capacity utilization are on average revised up or down by 30% within 12 months.

Raghuram Rajan, the new IMF chief economist, talks to Euromoney's Julian Evans about controlling special interests, IMF reform, and the difficulties of instituting market democracy in Iraq.

Strong growth and enhanced political stability appear to have broken down the barriers to foreign investment in Russia. But since much of what flows is disguised in various ways, it's hard to state precise figures.