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The derivatives markets have reached a new peak of maturity. Digital and barrier products are commonplace; trades in unusual currency and asset markets are growing in size and volume; and vanilla instruments are being used in ever more sophisticated combinations. Mark Parsley reports.

Credit research has leapt out of the back office. Spotting a cute arbitrage can make millions and banks are paying up for creative users of this fundamental talent. Their thinking? With the coming of the euro, credit differential will be a bigger factor. And in Asian markets there's growing demand for credit expertise. Brian Caplen encounters some at the cutting edge.

Competition drove white-shoe Morgan Stanley and blue-collar Dean Witter into a merger. Could other improbable matches be on the cards? Michelle Celarier assesses the implications of the union that took everyone by surprise.

Environmental legislation is getting tougher and bankers need to study it carefully. The simple act of lending to a company in environmental trouble may make the bank liable. By Christopher Stoakes.

DLJ is far from anyone's idea of a global investment banking powerhouse. But in important markets, such as high-yield debt or US equity underwriting, it has suddenly become a top player. Now the "the little firm that became big", as DLJers like to describe their bank, is moving overseas. Peter Lee reports.

Latin American bank earnings will expand faster than the region's expected 5% annual GDP growth. This time, though, with crisis-induced shake-outs, consolidation, foreign investment and competition, growth should have a solid footing. Jennifer Tierney reports.

"Much may be made of a Scotchman if he be caught young." So Dr Johnson had it. In the case of the Hongkong and Shanghai Banking Corporation, an institution founded by Scots and still governed by one, it has grown to be the world's most profitable financial group. The unique international officer culture that has driven it – young men caught young, trained up, messed together, posted, reposted, in the bank for life and rarely back in the UK – will have to change, but it's bending and adapting rather than breaking. Steven Irvine reports on its fitness for the 21st century.

With the economy recovering from the recession incurred by the peso devaluation, Mexican companies are poised to sell between $1 billion and $3 billion in equity to overseas investors in the next 12 months. After two years of stagnation, observers expect renewed domestic consumption in 1997 to revive expansion projects placed on the backburner since the 1994 crisis. If the markets are adequately bullish, more companies will feel comfortable enough to issue equity as a cheap way to retire expensive debt.

In 1996, the convergence rally on high-yielding European government bonds was one big, premature Emu party, staged in the belief that all the governments that said they'd be ready for first-round entry to the eu's single-currency system would be. Market enthusiasm was based on taking note of contender countries' political commitment to European economic and monetary union rather than their economic fundamentals. This year bullishness will be replaced by a more cautious approach, as the markets become increasingly volatile.

Last year the international markets raised a record $113 billion in new equity and equity-linked instruments. Judging by rising secondary markets and heavy trading volumes in January, and an ambitious privatization calendar, investment bankers should be in for another busy year. But are hectic new issue schedules a recipe for mistakes? Peter Lee asks if the equity bonanza could end in disaster

This year, expect liquid loan markets, structured deals and credit derivatives, securitization, merger and acquisition fever, rapid privatization, and growing numbers of mtn programmes

Bond markets face one of the biggest changes yet as bankers prepare for the coming of the euro and with it the creation of a huge, pan-European capital market. It's going to change the way a lot of borrowers raise capital and broaden the outlook of European investors. In the meantime, borrowers, particularly corporates, have been taking advantage of liquid markets, low interest rates, and investors' increasing appetite for risk. By Peter Lee