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Deals of the Year

Deals of the Year

Issuer: Deutsche Bank

The first month of euro trading has come and gone, and the battle for short-term futures contracts rages on. Liffe, Eurex and Matif - the UK, German-Swiss, and French futures exchanges - have been competing for market share of three-month futures contracts since January 4. Already there have been disputes about which has made the most successful transition to the euro and which is most liquid.

Deals of the Year

It is ironic that the strongest disciples of free markets are often the messiahs of currency pegs, fixed exchange rates and currency target zones. Those who believe the market should set the price for everything reject its decision on pricing international economic input and output.

Brazilian telenovelas - the South American equivalent of soap opera - are not noted for their strong take on reality. Fantasy is more their stock in trade.

The euro is a month old and already the new currency is bringing about changes more rapidly and more disconcertingly than expected. It is already clear that the removal of domestic currencies - and so the unique advantages enjoyed by local banks in their home markets - will wreak havoc with middle-tier institutions. In the payments business for example, it has only just dawned on the smaller German banks that their only asset was the Deutschmark. Without that domestic market, they will be unable to compete with the clearing giants. In the Eurobond markets, the euro will be the catalyst for more institutionalization of previously retail assets. This means the notion of local distribution will become meaningless. Local branches may sell a bank's new asset management service, but the bond-buying will be managed centrally. The winners will be the large underwriters with the best trading and research product. The losers will be banks whose operations were based on knowing pockets of local currency, largely retail investors. That is, most of them.

The Russian Federation has defaulted on up to $90 billion-worth of restructured Soviet-era debt, the GKO reschedulings are stalled and Western banks have laid off almost all their Russian workers. February has rarely been kind to Russians, and Muscovites, not the world's most upbeat urban dwellers at the best of times, believe that this one will be the worst for decades. Even so, there are glimmers of hope.

The logic of plugging together two industries - insurance and capital markets - is irrefutable and inevitable. But pricing insurance risk and selling it to investors is a painful process, frustrated by a glut of insurers selling their cover too cheaply. The visionaries are positioning themselves for a change in circumstances that could be swift and merciless, like the perils they're trying to insure. By David Shirreff.

To the Big Bang Control Centre in Docklands where Reuters is preparing to convert its 520,000 terminals worldwide to the euro in one fell swoop at 1800GMT on Sunday January 3.

Last June, India's new finance minister, Yashwant Sinha, promised to speed up privatization and said a majority stake in ailing domestic carrier Indian Airlines would be sold. No finance ministers had yet dared to make a public commitment to privatization; they had all used the more politically correct word - disinvestment. By December, paralysed by a fractious coalition government and his party's drubbing in the regional elections, Sinha had managed to sell only a small stake in a rail-freight company for $53 million. In January, as he prepared this month's budget, he had few options left to plug the large deficit.