What is the truth behind credit derivatives? Is the pricing of credit derivatives misleading bankers? Are participants fooling themselves over the benefits? This month we look at the risk management reality of these instruments and assess the latest market trends.
In reflecting on the Madrid bombings, we note in our supplement on Spain (one of six supplements this month) that business continues as usual. We also examine the chances of Spain’s outgoing finance minister Rodrigo Rato being the new head of the IMF, which faces credibility issues over Argentina. And we reveal the results of The Banker’s extensive FX poll and consider South Africa’s 10 years of democracy.

The determination of Spain to maintain normality after March’s attacks in Madrid served to highlight the nation’s strength.

European banks are having to consider carefully what to do with excess capital, since cross-border acquisitions are proving tricky.

Hard work awaits the eight countries joining the EU in May if they are to live up to European standards.

Congress’s insistence on more time not only threatens the June 2004 deadline but may lead to tandem versions of the accord appearing.

Argentina’s negotiating strategy of threatening to default on its loans to get its own way has underlined the case for greater IMF independence.

Despite the kickstart to merger and acquisition (M&A) given by two high-profile US deals, a report from Fitch Ratings last month stated that a growth in cross-border consolidation among financial institutions in Europe is unlikely. The report said that Europe was still fraught with regulatory, fiscal and cultural barriers, “not to mention a lack of any realistically achievable synergies”.

International rating agencies have reacted with mixed feelings to new improvements made to the Pfandbrief, Germany’s well known investment-gradecovered bond.

Citigroup’s agreement to purchase KorAm Bank in late February has sparked a round of consolidation, reflecting a keen interest by foreign investors in South Korea’s retail banking sector, the third-largest in Asia after Japan and China.

Profits at Bahrain’s locally incorporated banks more than doubled during 2003, compared with 2002.