If Africa is to change then key figures in Africa have to make it happen. This month, The Banker identifies eight of the major policymakers on the continent, their strategies for reform and their plans as architects of the renaissance. From South Africa’s Trevor Manuel to Congo’s Joseph Kabila, we look at the prospects, opportunities and challenges.
The Basel Committee has called on banks in 90 countries to carry out a fifth series of data studies to strengthen the models for the long-awaited implementation of the Basel II Capital Accord.
Mervyn Davies: Standard Chartered to pursue organic growth and acquisitions
New regulations for foreign banks in India have ended hopes of unrestrained growth in the expanding retail finance market. Foreign banks cannot acquire a local private bank except in the case of a weak bank, identified by the regulator. Additionally, local subsidiaries set up by foreign banks will not be able to open branches freely.
These restrictions will stay in place until 2009, when fuller deregulation is expected, including allowing market acquisitions of local private banks.
Austria’s Raiffeisen International (RZB) is in exclusive takeover talks with Ukraine’s second-largest commercial bank, Aval. “We are in talks that we have agreed will be mutual until May,” said the chief executive of Raiffeisen International, Herbert Stepic. “We want to take over the bank entirely.”
The policymakers of the African continent face some of the toughest challenges in the world today. James Eedes lists the eight most noteworthy figures who have worked to stabilise, reform and improve their respective economies.
UK chancellor Gordon Brown has emerged as champion of Africa’s cause, arguing for a better dispensation for the continent. UK prime minister Tony Blair is getting in on the act. And ageing rocker Bono of the band U2 is also a campaigner. In all this, it’s easy to overlook the fact that even with debt relief, more aid and fairer trade, Africans themselves have to implement the right policies, justify often tough measures to uneasy electorates and resist fierce opposition from reluctant or corrupt elites. It is a job requiring leadership, tenacity and political nous.
Egypt’s Prime Minister Ahmed Nazif explains how reforms are shaking up the country, from customs and tax to the public sector.
The problem with technocrats in government is that they often lack the ability to communicate with the people. That is certainly not true of Egyptian prime minister Ahmed Nazif.
Ian Mullen, IbFed chairman: “The time has now arrived when we need to strengthen the industry voice when dealing with supra-national policy and regulation”
As regulation tightens, banks are taking a firm stand. While acknowledging some rules are necessary, they want some room to manoeuvre. Michael Imeson reports.
The law of unintended consequences has once more been at work. International regulators, bent on constraining the global financial services industry with ever more laws and rules, have unwittingly helped to bring about the creation of a powerful counterforce, the International Banking Federation (IbFed). Its main purpose: to protect the vital interests of banks around the world from harmful legislative and regulatory action and other threats.
The banking industry accepts that much regulation – domestic as well as international – is necessary and, although there is a great deal of regulation that is of borderline use and cumbersome in its approach, they can live with it.
As they cut back investment bankers’ jobs, Wall Street’s bulge bracket firms strengthened their compliance departments to cope with growing regulation and scrutiny, and the rising salaries have begun to attract staff from regulatory bodies into corporate territory. By Sophie Roell.
Dave DeMuro has been at Lehman Brothers for two decades but nothing could have prepared him for the past few years. “The pace of rule-making is approaching the speed of light,” he says. “The pace of change and level of expectation from regulators have put enormous pressure on compliance personnel. The work is harder, both in terms of hours on the job and stress levels, because the stakes have become so high.”
Morgan Stanley’s response to the regulatory overload was a bit different from other Wall Street firms. The bank appointed a special head of regulatory matters to help co-ordinate the regulatory effort. Eric Dinallo, a former deputy of Mr Spitzer, was the man chosen for the job.
Beth Golden is refreshingly candid about the challenges of her new job. She, too, was formerly a deputy of Mr Spitzer and her legal background includes work on the Whitewater case. “It’s a steep learning curve for me,” she says.
Investment bankers at UBS have much to smile about, but there is still room for growth, particularly in European M&A and private equity-related business. Robert Gillespie talks to Geraldine Lambe.
Exuberance is a common commodity at UBS. At the investment bank, high spirits reflect the fact that mandates that would have been unthinkable only three or four years ago are no longer surprising.
With block trades now commonplace and the pace of deals accelerating, the battle for European equity capital markets is getting tough. European banks will need smarts and stamina to survive. By Carol Dean.
What a difference a few years can make in equity capital markets (ECM). Gone are the days of heavily oversubscribed deals and heady aftermarket trading witnessed in the late 1990s. The going is tough for European ECM players and only the biggest and strongest among the banks are expected to survive.
Sir Ronald Cohen: ‘The line between private equity and hedge funds will become increasingly blurred’
Private equity looks like providing an escape for overburdened listed companies. Karina Robinson examines the pros and cons of going private.
Who would be the CEO of a listed company these days? The downsides loom ever larger. The weight of regulation would put Atlas to the test. The expense, far from negligible, is increasing and the press and non-governmental organisations (NGOs) subject the company to a scrutiny that is often negative.
Barclays Capital’s investment banking team: (from left) Irina Lomteva, Sergei Stankovski, Donald Drew, Marco Baldini, Dmitry Gladkov
Barclays Capital confirms its presence in Russia’s bond markets with its role as joint bookrunner in the country’s first ever public issue of subordinated debt.
BNG’s Nathalie de Weert and Willem Littel: the benchmark programme has four key aspects
Growing funding needs led Bank Nederlandse Gemeenten to shift its focus from the retail to the institutional market. Edward Russell-Walling reports on this and the bank’s strategic benchmark programme.
In just five years, Bank Nederlandse Gemeenten (BNG) has reinvented itself as an issuer.
The coming crisis will be one of wrecked government finances followed by a painfully slow restructuring. The idea that somehow, far-sighted technocrats have managed away booms and busts and that benign economic conditions will always prevail is patently absurd.
Then there’s the pension schemes. What is to be done about them? Asset managers complain that it’s an uphill struggle persuading trustees and consultants to take a more dynamic approach. Often mandates are constrained by numerous restrictions, such as not going short in the equity markets and by not investing in bonds below a certain credit rating.
The securitisation engine has moved on to private equity. With the initial public offering as the natural outcome for private equity long since discredited, it’s now through successive leveraged buyouts (LBOs) that firms change hands. The increased debt burden prompts credit downgrades and there is a need to look at alternative forms of finance post-LBO. A recent survey of European private equity houses by Demica, a firm that specialises in trade receivables securitisation, found that while nearly 12% of LBO deals currently involve securitisation, the proportion is expected to rise to 16% by end of 2006.
Still in his mid-40s, fixed income doyen TJ Lim decided he was too young to retire, but he was definitely through with big investment bank politics and bloody mergers.
A plethora of new products in the credit derivatives market means that investors, and sometimes bankers, struggle to keep up with developments. Natasha de Teran asks why some products take off easily while others strain to build traction.
Credit derivatives have been the hottest and fastest growing sector of the over-the-counter (OTC) derivatives market for some time now, drawing in players in ever-greater numbers.
Alain Closier, head of global securities services for investors at Société Générale
In a business that is not known for generating huge profits, where providers are under pressure to keep their costs down, custodians must ensure that their outsourcing models will be profitable in the long term. Dan Barnes explains how integration spells domination.
The race is on among custody providers in Europe to develop their outsourcing offerings ahead of the expected wave of demand from investment managers. Back and middle office functions are expected to be shipped out over the next three years.
Covered bonds are hot property across the world from Europe to Asia. But pending legislation and regulator concern mean demand is fast outstripping supply. Michael Marray reports.
Gertrude Tumpel-Gugerell, of the European Central Bank, discusses the implications of fragmented capital markets in the EU and why integration is crucial. Market segmentation is still strong in retail and the mortgage market, in particular, needs urgent attention.
Mortgages are regarded as key to unlocking the benefits of an integrated single market for financial services. Philip Williamson, president of the European Mortgage Federation, looks at market developments and how covered bonds, once the preserve of housing finance, are emerging as one of Europe’s major funding instruments.
Erich Pohl, chairman of Desdner Kleinwort Wasserstein in Germany and global co-head of capital markets
A lot of the groundwork for a German revival is complete. The news remains bad but then the darkest hour is often just before the dawn. Brian Caplen reports.
While the headline news about Germany’s economy remains dire and political battles continue to be fought over reforms and job losses, behind the scenes Europe’s largest economy is showing signs of restoration to at least some of its former glory.
Most commentators are not expecting radical change to result from either of the two key pieces of banking legislation due this year. The planned abolition in July of the state guarantees currently afforded to the Landesbanken – institutional liability (Änstaltslast) and guarantor liability (Gewährträgerhaftung) – is unlikely to bring about major restructuring.
Karsten von Köller: ‘In Germany we have a
mountain of NPLs; it’s an excessive amount’
A US fund is leading the way in dealing with Germany’s bad loan overload. Brian Caplen reports.
The great potential of German distressed debt may not be obvious to all but it is proving attractive to Lone Star, the US private equity fund that has purchased two-thirds of all the non-performing loans (NPLs) sold by German banks.
Yet with an estimated €300bn of bad loans in the German banking system and so far only €10bn sold, there is no danger of supplies evaporating.
Dirk van Daele: “New forms of capital raising for the Mittelstand have to be found”
Germany’s medium-sized companies’ political clout has led to banks coming up with innovative capital-raising solutions for them, says Brian Caplen.
Refusing to lend to the Mittelstand in Germany is the fastest route to bad publicity and political outcry. These small and medium-sized enterprises account for three quarters of output in Germany, higher than in most other western European economies where large firms dominate. What’s more, they have a large political voice.
The fact remains, however, that lending to the Mittelstand at low margins does not make economic sense for banks, even if it makes good politics.
Sureyya Serdengecti, governor of the Central Bank of Turkey and The Banker’s Global Central Banker of the Year, discusses his strategy and the challenges ahead.
Romania is celebrating a successful 2004 in which taxes were cut and GDP grew. Now its sights are set on EU accession and newly elected President Basescu faces some tough decisions in the longer term. Matei Paun reports.
Romania is catching up with its neighbours as it prepares for EU membership. Politicians are keen to repeat 2004’s growth and investment levels – which means a busy time for banks. Matei Paun reports.
Romania is catching up with its eastern European neighbours in the attraction of foreign direct investment. Matei Paun reports on last year’s record performance and conditions that bode well for the future.
International investors, desperate for yield, have been tapping the Romanian stock market for opportunities. Matei Paun reports on the resulting wave of liquidity.
For a country that looks economically healthy, New Zealand’s finance minister Michael Cullen has much work to do. Hugh O’Shaughnessy, in Wellington, speaks to him about the importance of foreign investment and encouraging domestic saving.
Sam Knowles: “We will be twice as big as we expected after 10 years”
State-owned Kiwibank may be small but it is gaining popular support, writes Virginia Marsh in Wellington.
An interesting experiment in community banking in the southern hemisphere has just passed an important milestone.
Kiwibank, the government-owned ‘People’s Bank’ set up amid much derision in 2002 to take on New Zealand’s foreign-owned commercial banks, in March reported its maiden profit of NZ$2.5m for the six months to December, a year ahead of its business plan.
HSBC in India is preparing for an expected boom in the SME sector by targeting smaller businesses that have growth potential. Kala Rao reports from Mumbai.
No customer is too small for HSBC, says Subir Mehra, who heads the bank’s small and medium-sized enterprise (SME) business in India. That is what prompted it to mine its retail banking customers in India, looking for small businesses that are poised to grow dramatically in a fast-expanding economy.
Dolores Benavente: ‘Supervision has to be
much stricter’
Uruguay is bouncing back from the economic downturn caused by its over-reliance on Argentina. Tighter banking supervision will be key to maintaining the country’s growth. Jason Mitchell reports from Montevideo.
Uruguayan authorities need to tighten banking supervision if the country is to regain its reputation as a sound financial centre.
Jorge Alfaro, head of consumer credit at Santander Serfin in Mexico
Credit cards are becoming more popular in Mexico but banks have barely scratched the surface of the potential customer base. Monica Campbell reports from Mexico City on how lenders are grabbing a share of this huge market.
While Mexicans do not yet face the blizzard of credit card deals seen in wealthier nations, the credit card culture there is catching on fast and commercial banks are jockeying to get their share of the action.
Saudi Arabia’s banks are enjoying the spoils of buoyant markets, with record-breaking profits spurring ground-breaking deals. Stephen Timewell reports.
Roundtable: (from left) Elham Hassan, Jawad Ali, The Banker’s editor-in-chief Stephen Timewell, Rashid Mohamed Al Muraj, Toby Fiennes and Sir Roger Tomkys
Stephen Timewell reports on FT Business’s seminar on new opportunities in Bahrain as it develops its Islamic banking sector and regulatory powers.
Qatar is fostering a project finance partnership with the international finance community via establishment of the Qatar Financial Centre and the approval of new laws. Stephen Timewell reports from Doha.
Estimates suggest that the total value of investment project opportunities in Qatar in the 2004-2010 period across all sectors, from LNG to education and research to hotels, is around $110bn. And around $33bn of these are described as “open projects” which still have financing needs and are available to external investors.
Qatar’s financial centre is based on a very different model to others in the Gulf, and is designed to attract big business, as Stephen Timewell explains.
The Qatar Financial Centre Regulatory Authority’s new chairman tells Stephen Timewell how the centre is establishing a one-country, two-system environment.
After extensive research into international taxation practices, the Qatar Financial Centre has adopted a different tax regime from the rest of the country.
Qatar’s law is being amended to liberalise foreigners’ ability to buy equity listed on the Doha Securities Market, boding well for the fast rising index. By Will McSheehy.
Shrewd exploitation of its gas reserves has catapulted Qatar to the forefront of the global project finance industry, write Jon Marks and Eleanor Gillespie.
After a slow start, banks are more optimistic about mobile phone financial services finally taking off, with contactless payment methods such as text messaging now on offer. Wendy Atkins reports from the 3GSM show in Cannes on some recent developments.
Strategic sourcing and procurement systems are paying off in terms of cost reduction and also in terms of good governance, which is essential for IT departments to avoid a repeat of the technology failures of the past, says Dan Barnes.
Banks have been pretty successful at facing down regulation. But do they actually need to? And how long before the regulators hold their nerve and force the financial institutions off the road instead? By Chris Skinner.
In the EU, issues relating to the single currency, cross-border transparency and the accession countries bring additional complexity to an already fragmented cross-border payments environment.
