Alessandro Profumo has built his banking group through acquisitions, cementing his reputation as a brilliant dealmaker. The challenge facing UniCredit’s CEO is to get the most out of his empire. At the heart of the group’s strategy is aggressive organic growth in emerging Europe. Sudip Roy reports.

One of the puzzles of Islamic finance is how Indonesia, the world’s most populous Muslim nation, has been so utterly left behind in its development. Nearby Malaysia has evolved the most sophisticated regulatory environment for Islamic finance anywhere in the world and, after building an admirable domestic base, has now opened its doors to foreign entrants. Several Gulf states, notably Bahrain, have built centres of excellence around Shariah-compliant finance; and even less-developed nations such as Pakistan are making up for a slow start and witnessing a boom in this growing area.

Turkey set out on the road to EU accession some 60 years ago but the goal remains elusive. Turkish bankers consider the journey worthwhile. But, they muse, if the country keeps on being spurned it should look east rather than west to apply its new-found expertise and dynamism. Eric Ellis reports.

Has the credit crunch led even the brightest students to lose all interest in the financial services industry?

Bank chiefs in the region have much to cheer but can’t help feeling a little uneasy. They have no direct exposure to the sub-prime fallout, but have had to rethink their funding strategies. And while they see clear opportunities to grow, an economic slowdown could be looming.

Euromoney asked eight leading chief executives what impact the credit crunch has had on their banks and what they think are the problems and advantages of being a local bank in a time of global crisis.

The SEC and the FSA have both acted too hastily in reacting to short selling. In the UK, the new disclosure rules have compounded the turbulent mood of the market. Neil Wilson reports.

The present round of bank reorganizations look as if they might not be as efficacious as leaving things well alone.

Many banks will become less-levered, more conservative, far duller institutions promising much lower and more utility-like returns to investors

Concerns about an economic slowdown now weigh on capital markets.

Government intervention in financial markets goes against the grain of any US administration. However, it appears preventing closure of the mortgage finance markets is more important than ideology.

"For the rest of the bank, we’re actually managing the businesses; with the problem assets we’re not really managing them at all, we’re just managing the accounting"

Lawyers around the world are readying lawsuits to file against banks that sold toxic products to investors. Which types of deals are likely to be the subject of the biggest payouts? And how will banks pay for them?

It could be the perfect storm – financial, macroeconomic and geopolitical risk are all on the rise. Risk is both where you anticipate it, and where you least expect it.

Continuing problems are forcing firms to reconsider market timing, the balance between public and private funding and the importance of neglected sources such as retail and corporate deposits. Six specialists debate the issues.

"We have all the signs of emerging markets in the US now – there’s stagflation, growing unemployment, excess debt, poor monetary management – I just wonder when the US will be included in the EMBI+"

Chief executives need to lead from the front to achieve cross-company support for supply chain management projects and they need to identify the right partners to help them adopt successful strategies.

Standard Chartered has promoted Todd McDonald to the new role of global head of FX electronic pricing and trading. McDonald, who was previously the bank’s FX trading head, Americas, will now be based in Singapore. As a result of his move, Keith Underwood, currently head of FX trading, UK and Europe, will relocate to New York.

VTB, Russia’s second-largest banking group, continues to add to the array of western talent in its investment banking business. Its latest hire is Herbert Moos, who has been named as chief executive of VTB Bank Europe in London. Moos joins from Lehman Brothers, where he spent 14 years, most recently as chief financial officer for Asia-Pacific ex-Japan. Moos will be responsible for developing the investment business of VTB in London, Asia and the Middle East. He will report to Yuri Soloviev, head of investment banking.

Markets are more susceptible to the herd mentality and the creation of bubbles because of agents’ behaviour. Following the money can solve a large part of the asset price puzzle.

"Our long-term view remains – we will eventually see 1.60 for cable and parity for EUR/GBP" -Paul Day, Mig Investments

Some 190 IPOs seeking to raise $33.1 billion in capital have been postponed or withdrawn across the world so far this year, according to Dealogic.

India moved a step closer to liberalizing its foreign exchange market with the launch of rupee currency futures trading on the National Stock Exchange on August 29. Initial activity was brisk, with about 70,000 contracts changing hands in the first session. The NSE contracts are extremely small by international standards – they have a notional value of just $1,000 – and would appear to be very much aimed at attracting retail participation. Perhaps not surprisingly, early trading was dominated by banks and large corporations.

Senior bankers in China remain confident that the economy will continue to provide a favourable backdrop for the banking industry, despite a slowdown in growth. However, some concede that a more complex economic environment in China and abroad will bring greater challenges to the banking system, especially in risk management.

IPOs are scarce enough as it is in this gruesome global market. But the largest ever IPO from one of the world’s poorest countries, whose previous record deal was in 1994? That’s rarer still.

As the equity market continues to struggle in Brazil, the local debt market is growing in importance. The challenge is to find enough bankers to fill the demand.

The tables are starting to turn in the Brazilian banking market – for the first time foreign-owned banks have become acquisition targets for locals Itaú and Bradesco, valued at more than $60 billion each, which now dwarf the purchasing power of several of the international banks in the aftermath of the sub-prime crisis.

David Puth, the former head of FX and commodities at JPMorgan, has resurfaced after nearly two years out of the market. He has been appointed to the new position of head of investment research, securities finance and trading activities for State Street. He will report to Jay Hooley, president and chief operating officer of the Boston-based bank and will sit on the company’s operating group. Puth spent many years at what was originally Chemical Bank, going through several mergers and takeovers to end up at JPMorgan. After he left the bank in November 2006, he founded risk management and advisory group Eriska; he also joined Icap’s board as a non-executive director in November 2007.

Hedge fund administrator Fulcrum, has merged with the hedge fund services arm of Butterfield Bank, an award-winning Bermudian bank.

With a huge pipeline of covered bond issuance planned for the next few months, much is being asked of investors. There might not be enough of them to go around.

The greenback revival, driven by ECB recognition that the eurozone is faltering, will be sustained by the narrowing of the US current account deficit, the fall in the oil price and the US pursuit of a soft monetary policy.

Gulf firms raised a record $15.76 billion in rights issues from July 2007 to June 2008, a 242% increase on the previous 12 months. In the first six months of 2008, rights issues in the Gulf Cooperation Council states raised $11.9 billion from shareholders, according to research from UK law firm Trowers & Hamlins.

Barely a day goes by without a new craze for so-called frontier markets in Africa being mentioned somewhere. But are the returns worth the fuss?

Georgia’s ill-fated attempt to prevent the secession of South Ossetia and Abkhazia is set to cost the country billions of dollars, but financial backing from western Europe and the US should help to ensure that the country’s economy remains one of the most open and business-friendly of the states that were formerly part of the Soviet Union.

Bankers are in the final stages of preparing Iran’s first ever securitization, according the head of a Tehran investment bank.

Moscow private equity firm Mint Capital has taken a stake in beer restaurant chain Tinkoff Restaurants.

Australian hedge fund Basis Capital is to pay $23 million to investors in two of its funds. The investors put their money into the funds in June 2007, the month investments were frozen because of liquidity problems. Because the money had technically not been invested until September, the investors were able to claim a full refund. Other investors in the struggling funds now being advised by Blackstone will suffer losses.

US long/short fund Andor Capital, spun out of Pequot Capital in 2001, is closing its doors and returning money to investors. The fund manages more than $2 billion in assets. Co-founder David Benton said in a letter to investors that he wanted to devote more time to his family and other interests.

Mohammed Al-Hussein, Syria’s minister of finance, talks to Sudip Roy about the effects of oil price rises and declining domestic production, the development of the country’s banking sector, and efforts at budgetary control and the development of a T-bill market.

Lebanon’s banks are slowly moving away from their traditional reliance on sovereign debt – but not because they lack faith in their own country. Alex Warren reports from Beirut.

Commercial banks eager to exploit the opportunities in a rising sub-Saharan Africa might have to pay a high price for first-mover advantage. In this most local of retail banking markets, home-grown firms have developed the most effective, innovative approaches. As Dominic O’Neill finds out while bouncing along dirt roads in Kenya and Mozambique, international firms need to follow the locals’ examples, or discard their most basic ideas of what a bank can do.

Venezuela’s president, Hugo Chávez, has announced plans to nationalize the Bank of Venezuela, the largest bank in the country. Chavez has asked for a meeting with Spanish group Santander, which owns the bank, in order to agree a price.

Some European banks are coming through the credit crisis relatively unscathed, or even with enhanced market positions and reputations. Never has differentiation been more important.

Central bank governor Martin Redrado is confident he can win the fight against inflation, but investors are sceptical of Kirchner’s policies.

VTB’s ambition is to be a leading universal bank in Russia, with a strong balance of revenues from its retail, corporate and banking arms. But does it have the wherewithal to achieve those lofty goals? Guy Norton reports from Moscow.

The reintroduction of mandatory market-making in Pfandbriefe has not gone smoothly.

With the sale, among other assets, of the state telecommunications firm, privatization in Iran seems to be accelerating. There is an apparent eagerness to attract foreign investors. But, some say, if capitalism in Iran is being let out of the pen, it is still being kept on a tight leash. Dominic O’Neill reports.

The blow-up of corporate trades in China might lead to regulatory restraints on transparent, run-of-the-mill derivatives use.

US leaders might ponder the lessons of Venezuela and Iran.

Despite a new round of fundraising for distressed ABS, a market floor is not necessarily in sight.

The Eurobond market has existed for 45 years and its infrastructure reflects that. Bondholder trustees are gearing up to change one aspect that should improve their ability to obtain bondholder agreements. The present system – if it can be called a system – requires bondholders to receive 21 days’ notice of a meeting, which might or might not be quorate. If it is not quorate, another 14 days must elapse before another meeting can take place. The method through which bondholders are notified is equally antiquated. Investors are informed via newspaper adverts or through clearing agents.

Japan’s agencies have long been dependable if staid issuers, with their government backing and tendency towards regular benchmark issuance providing a steady source of bonds yielding 15 to 20 basis points more than Japanese treasuries. Now they face change: in a series of reforms aimed at reducing government involvement in public finance, Development Bank of Japan (DBJ) is to be privatized and Japan Bank for International Cooperation (JBIC) is merging with a group of other government finance institutions to form a new firm called Japan Finance Corp. Their paths will diverge dramatically: JBIC will continue to enjoy government backing and is thinking only of tinkering with its borrowing routines by offering more benchmarks. DBJ is striking out on its own as an investment bank, and aiming rather high if management are to be believed. DBJ, a regular benchmark yen issuer in the international markets since 1960, is to begin to be privatized in October and will gradually reduce issuance of government guaranteed bonds from the present ¥190 billion ($1.9 billion) to a projected maximum of ¥160 billion in financial year 2008.

HSBC’s attempted takeover of Korea Exchange Bank has been in limbo for more than a year, pending regulatory approval that in turn depends on the outcome of a court case involving individuals charged with improper conduct in the Korean bank’s original sale to private equity firm Lone Star. With the initial deadline already passed, the Financial Services Commission has said it is still reviewing the case, and Korean banks have said that they too would be interested in KEB. Richard Wacker, the bank’s chief executive, is a 20-year veteran of General Electric brought in by Lone Star in February 2004 to turn the then-troubled bank around. Euromoney spoke to him in Seoul about the frustrations of the delayed deal, his plans for KEB’s future and what having HSBC as a majority shareholder could mean for his bank.

India remains an attractive investment opportunity for private equity funds despite a weakened economic outlook for the country and inflation at a 13-year high. Caroline Williams, a private equity partner at law firm Walkers in the Cayman Islands, says India is seeing increased interest from offshore money that is to be put to work in the national infrastructure programme over the next five to seven years. India is beating China in attracting private equity funds says Walkers. Private equity investment has risen consistently from $2.03 billion in 2005 to $17.14 billion in 2007. And the deals are getting bigger. In 2007, 48 deals of more than $100 million were closed compared with 11 in 2006, according to the firm. A further estimated $500 billion is needed in the next five years to meet infrastructure development plans for India.

Asia-focused hedge funds received $530 million in new assets over the second quarter, down from $1 billion in net inflows the previous quarter, according to HFRI. Its Asia hedge fund index has lost almost 14% this year. Recent research by Singapore fund of hedge funds GFIA suggests that performance is better among indigenous managers, and that London and New York will continue to lose market share to Asia strategies.

A study by quant fund AQR says hedge fund replicators are not necessarily what investors want. The new indices launched by banks such as Goldman Sachs, Credit Suisse and Merrill Lynch are too highly correlated to other asset classes within an investor’s portfolio to add much value, says the study. Furthermore, their inability to capture tactical shifts in hedge fund exposures because of lack of public information means that replications might not keep up with hedge fund moves.

CLS has hired Roger Rutherford as its head of product management. Rutherford, who reports to Rachael Hoey, director of business development, joins from Icap’s EBS unit where he held several roles, including leading the EMEA sales team; he was also a key member of the team that launched EBS’s prime brokerage offering and more recently was spearheading the introduction of NDF trading on to the EBS platform. Many years ago, he was a voice broker at Marshalls.

Faced with growing evidence that issuers were gaming the scheme, the European Central Bank has finally tweaked the collateral requirements for its repo liquidity programme. Haircuts for ABS and unsecured bank bonds have been increased, the former up from 2% to 12%. This brings the scheme into line with Bank of England and Federal Reserve rules – but in reality makes ECB rules more stringent as the maturities on offer are shorter. The ECB has also tightened the close-link rules so that ABS collateral for which the seller is also swap counterparty is disallowed. Seller liquidity support of more than 20% has also been axed. The rules are likely to have an impact on smaller banks that have relied on ECB liquidity but analysts at Deutsche Bank calculate that the incremental cost to banks following the haircut change is 50 basis points. This means that the ECB window is still the most cost-efficient funding channel available to banks if maturity is not a consideration. "This change alone is unlikely to compel many banks to return to the securitization capital markets," conclude the DB analysts.

MBIA has agreed to reinsure a $184 billion portion of FGIC’s municipal bond book in a deal that reduces risk exposure for the latter and improves the capital position of the former. The solid municipal credits will also improve the risk profile of MBIA’s book. Under the deal, if a credit event is triggered on FGIC, protection buyers have a claim on MBIA for these assets – but there is still some legal uncertainty as to how this process would actually work. In a separate development, FGIC has paid a $200 million settlement to Calyon to commute CDS written on IKB’s Rhineland conduit. FGIC is suing IKB for fraud in relation to the now defunct vehicle.

The rapid expansion of samurai bonds (yen-denominated deals sold by foreign borrowers into Japan) puts them firmly in the coveted list of credit-crunch beneficiaries. Borrowers of all types facing the increasingly expensive prospect of issuing in their illiquid domestic markets are finding an attractively cheap alternative in Tokyo. The bonds are also attractive for individual investors in Japan, offering higher yields than domestic bonds or the interest paid on savings accounts.

But exchange still looks like a political tool.

Today’s long-term rise in agricultural commodity prices is different from previous episodic spikes. Higher prices are having knock-on effects on companies in the sector, as well as on farmers and the poor, and causing a re-evaluation of business models. Peter Koh reports.

Australia’s new finance minister still has to convince his fellow citizens that he can keep the economy on an even keel.

"More business is done here in the sauna after a good round of golf than is ever done in meeting rooms," says a senior manager at a top investment bank in Seoul, perhaps a touch wistfully, when Euromoney’s correspondent asks for advice on networking on a recent visit to Korea.

Iran’s banks have had their access to international liquidity curtailed by sanctions imposed by the US. This photo, of a Bank Melli cashpoint, suggests its management may have gone a little too far in protecting their deposit base. Either that, or perhaps the marketing department got the wrong end of the stick in a drive to attract high net-worth individuals?

Of benefit to both the environment and HSBC’s bottom line is the opening of a new internal network of conference rooms by the UK bank, which CIO Ken Harvey says will give "the experience and benefit of actually being in the room with colleagues on the other side of the world, without having to pack a suitcase".

The bank has shone through Kazakhstan’s financial sector gloom thanks to the chief executive’s cautious policies that he put in place while rivals were borrowing abroad to fund over-risky lending. Elliot Wilson reports.

Jean-Claude Trichet, European Central Bank.

Bureau de change claims liberalization of country’s regulations.

Complex securitization without a single new bond.

Peru’s dramatic rise from market pariah to investors’ darling was capped this year with investment-grade status awarded by Standard & Poor’s and Fitch, opening Peruvian capital markets to huge interest among institutional investors. Ironically, Alan García, the president who made Peruvian debt a no-go area in the 1980s with soaring inflation and bond defaults, oversaw the upgrades in his second term, two decades later as a free-market convert.

Palestine is a surprisingly attractive prospect – good enough to hold the attention of private and public investors at a conference this year. But Gaza, which must develop pari passu with the West Bank if the Territories are to prosper, is an unstable imponderable. Chris Wright reports.

Weak infrastructure is probably the single biggest obstacle to emerging nations fulfilling their potential. Infrastructure shortcomings in Latin America and Asia are well documented but even in the Middle East, a region flush with petrodollars, more investment is required, especially from the private sector.

The growing trade links between Russia and Serbia are likely to lead to a greater Russian presence in the Balkan country’s banking sector. That is the view of Alexei Sytnikov, vice-president of Bank of Moscow, Russia’s fifth-largest banking group by assets, which has established a wholly owned subsidiary in the Serbian capital Belgrade with an initial investment of €15 million. "We believe that the probability of other Russian players entering the Serbian market is very high," says Sytnikov, who is responsible for Bank of Moscow’s international banks. He adds that all the prerequisites for Russian banks, most likely from among the top 30 players, are in place for them to look to set up subsidiaries in Serbia – strong economic growth, a relatively low level of competition in the financial services sector and a growing Russian business presence.

New governor Boediono has to put the central bank back on track as a corruption trial looms over a previous incumbent.

Japan’s Mitsubishi UFJ Asset Management Company and Brazil’s Bradesco Asset Management have agreed to set up a mutual fund that will invest in Brazilian bonds.

The BarclayHedge CTA Index ended July up 7.08% year to date, outperforming the aggregate hedge fund index by more than 10%. The Barclay hedge fund index, however, returned –4.45% up to the end of July. Returns such as these are encouraging investors to allocate to CTAs away from other strategies, say managers.

Poland continues to be a leading source of private equity business in emerging Europe, with recent transactions demonstrating the country’s attraction from both a retailing and manufacturing perspective.

In contrast to the US and western Europe, the private equity industry in Russia is in rude health. Guy Norton reports from Moscow on the rationale for the optimistic outlook.

Outstanding contribution to finance: Dr Sri Mulyani Indrawati, Indonesia

Global regulators are poised to introduce new rules to clamp down on the securitization industry’s worst excesses. But in doing so they could kill it off for good.

China’s finance minister has had a difficult first 12 months in charge, but has succeeded in maintaining the country’s economic momentum.

Banks are booming in Nigeria on the back of oil revenue inflows. But solutions to some of the country’s problems – particularly the need for infrastructure development and a reversal of falls in oil production – remain stymied by an inflexible political system. Rupert Wright reports.

The European retail structured products market could be more than twice the size previously thought, according to Greenwich Associates.

International supranational, sovereign and agency borrowers raised billions in dollar issuance during the first half of the year. This was a continuation of 2007, when volumes from supras and European agencies rose 14% to €241 billion, according to Dealogic. The dollar activity was driven, in large part, by central bank investors that were attracted by wide swap spreads and their wish to diversify away from the government-sponsored enterprises. The woes of the GSEs have increased and the high-level investor sponsorship the European Investment Bank received at the end of August for its $4 billion three-year issue, led by BarCap, Citi and JPMorgan, illustrates the state of the frequent borrower sector.

Growth potential, better corporate governance, a shot of expert knowledge and a troubled stock market are all reasons why family-owned firms might sell stakes to interested outsiders. Alex Warren reports.

The Middle East's most successful banks remain on a determined course for growth, both regionally and in terms of the products they offer. Will the boom in financial markets and services continue, despite political uncertainty and the contagion of the credit crunch?

The continent’s main markets, such as Nigeria, Kenya, South Africa and Angola, are attracting growing interest from investors. Foreign and local emerging market financial specialists analyse this change of attitude.

Mexico’s central bank governor has achieved rock-star status with his tough line on inflation by standing up to the president’s pressure to reduce interest rates.

Commodity prices will need to go higher again to prompt consumer and producer actions that bring them down.