Commentary

IASB* recently published an exposure draft on the classification and measurement of financial instruments. This is the first of three planned phases to replace the controversial International Accounting Standard 39 (IAS 39), which determines how financial assets and liabilities are accounted for. It is a complicated area, and has been the target of much debate in the international arena, with governments and companies around the world getting into the fray.

Valuations for private banking assets dropped significantly after the end of the last major boom in 2007. The landscape of private banking is rapidly changing as large local institutions try moving up the value chain and full service private banks try leveraging their corporate banking set-ups to gain bigger shares of the market. In a quest to tap Asian wealth, multiple initiatives in private banking have been created which will lead to multiple M&A opportunities in this sector. Although opportunities are developing, executives should resist the temptation to assume that their organizations possess the whole truth about M&A management and should be wary of the following “half-truths” regarding some of the common M&A pitfalls in the world of private banking: 1. To satisfy investors, an M&A transaction must unlock big value gains quickly: The way to impress investors is to deliver on your promises, so resist the impulse to promise more than you can deliver in a short time. 2. Focusing purely on the deal’s strategic purpose during the integration ensures that the vision will come true: You should translate the vision into an “end-state” definition that includes the new company’s products, platforms, resources, locations and other attributes. 3. A detailed master plan is essential for a successful integration: You need an overall plan, but don’t overestimate what you’re likely to achieve by creating one or underestimate the need to augment and revise it as you go along. 4. Responsibility shifts as merger cycle proceeds: There will be some role changes over the cycle, but the whole team should be involved from start to finish. 5. During integration you should strive to retain key managers and employees: You should re-enroll not only people inside the organization, but also other key constituencies, including customers, suppliers and business partners. 6. Constant communication keeps employees informed and prevents unwanted departures: You need more than just Rhetoric from the front office; you also need leaders who model the desired values and behaviors of the merged organization, as well as mechanisms that permit communication from the organization to the leaders. 7. To achieve planned revenue synergies, start implementation early and push hard: In the early stages, the challenge is to keep sales and customer service from getting hurt by the turmoil. Focus on avoiding harm rather than achieving big gains. 8. Precise targets for reduction are vital for capturing synergy: Being specific about reductions is important, but reductions from what? The starting point from which the cost reductions will be measured should be clear as well. 9. Day one should be issue free: Issue-free doesn’t mean perfection. Focus on essentials and go with solutions that are 70 percent perfect but 100 percent achievable. 10. Day one marks the end of the beginning: Day One is a crucial milestone but hardly the end of the line. Much will remain to be done and integration efforts will need to be redoubled as Day One fades into history. In regards to the Private Wealth Management industry, banks need to stick to their growth plans but they shouldn’t get too “greedy” – as investment banks have shown – by trying to do too much at times when valuations are comparably lower. Of course there is a window of opportunity for large local banks or foreign full service banks to become significant players in these sector but these firms need to make sure that it really is a match.

If this banking crisis is as bad as it gets, then Singapore’s banks can afford to pat themselves on the back.

How microfinance exchanges like ZOPA, Lending Hub, Prosper, Smava and Boober threaten banks.

The recent turmoil in the financial sector has highlighted the lack of sufficiently effective risk management among banks and other financial institutions. All too often, efforts in risk management are dispersed, isolated and unrelated to the wider organization strategy. Financial institutions should be adopting a more comprehensive and integrated risk management approach that not only takes into account strategic, operational, financial and compliance risks, but one that is also intimately linked to performance management.

Shrinking spreads in the region have retail bank franchises engaging in a battle for deposits and running into significant headwinds. As the cost of funding increases, analyzing the underlying cost of acquisition is just one area that retail banks can explore in their quest to reduce the cost of funding (which vary by the kinds of client groups the bank serves and the associated costs of distribution.)

“Nobody knows what’s going to happen,” said F1 guru, Bernie Ecclestone, when asked what the impact of the financial crisis will be on major sports sponsorship.

“Nobody knows what’s going to happen,” said F1 guru, Bernie Ecclestone, when asked what the impact of the financial crisis will be on major sports sponsorship.

Big-name foreign bank CEO’s can be forgiven for thinking Indonesian lenders are the best things since sliced bread. Maybank and HSBC in the space of a month, have both made big plays for Indonesian banks, PT Bank Internasional Indonesia and PT Bank Ekonomi Raharja. Just in September, Maybank shelled out over USD one billion for a 55 percent stake in Internasional. And in October HSBC purchased an 88.9 per cent stake in Ekonomi for USD 608 million.

Many seasons have passed since we last talked about the readiness of Japan’s mighty finance houses to boldly go where few Japanese banks had gone before - overseas. Then, Daiwa Securities chief, Shigeharu Suzuki, was boasting of a 100b Yen commitment to regional investment, while Nomura announced its intention to acquire an Indian investment bank. Since those joyful days we have had the season of ‘Thanksgiving’ – when a summer of bad news such as failed bank, Northern Rock, finally gave way to another upsurge in global equity markets. Then came the season of ‘Panic’, after Bear Sterns famously imploded and speculation of who would be next spread like a fever.

Many seasons have passed since we last talked about the readiness of Japan’s mighty finance houses to boldly go where few Japanese banks had gone before - overseas. Then, Daiwa Securities chief, Shigeharu Suzuki, was boasting of a 100b Yen commitment to regional investment, while Nomura announced its intention to acquire an Indian investment bank. Since those joyful days we have had the season of ‘Thanksgiving’ – when a summer of bad news such as failed bank, Northern Rock, finally gave way to another upsurge in global equity markets. Then came the season of ‘Panic’, after Bear Sterns famously imploded and speculation of who would be next spread like a fever.

Many seasons have passed since we last talked about the readiness of Japan’s mighty finance houses to boldly go where few Japanese banks had gone before - overseas. Then, Daiwa Securities chief, Shigeharu Suzuki, was boasting of a 100b Yen commitment to regional investment, while Nomura announced its intention to acquire an Indian investment bank. Since those joyful days we have had the season of ‘Thanksgiving’ – when a summer of bad news such as failed bank, Northern Rock, finally gave way to another upsurge in global equity markets. Then came the season of ‘Panic’, after Bear Sterns famously imploded and speculation of who would be next spread like a fever.

Big-name foreign bank CEO’s can be forgiven for thinking Indonesian lenders are the best things since sliced bread. Maybank and HSBC in the space of a month, have both made big plays for Indonesian banks, PT Bank Internasional Indonesia and PT Bank Ekonomi Raharja. Just in September, Maybank shelled out over USD one billion for a 55 percent stake in Internasional. And in October HSBC purchased an 88.9 per cent stake in Ekonomi for USD 608 million.

ABN AMRO’s Timothy O’ Keeffe explains the challenges faced by corporate treasuries and recommends ways on how to achieve a more centralized and automated flow of information and investments.