Sunday, August 31, 2008

Tips/Suggestions/Ideas to Financial Advisors

Does It Pay to Advertise in Print?
9 Ways to Improve Results
By Vanessa Richardson
June 12, 2008

You don't need to run big ads
Tout your achievements
Your pay-off may take a while

For the full article

Turn to AdvisorMax for all of your practice management needs. Sign up for a free membership to access thousands of tips and strategies from financial planning experts that save advisors time and make their businesses more efficient and profitable.

Saturday, August 30, 2008

Relationship Manager Compared to Salesman

Salesmen are oriented to transaction selling. Transaction selling refers to focus on a single transaction. Salesman identifies a prospect, approaches him and motivates him to complete the buying process. The emphasis is in on the need or want for the product and the fulfillment of the want through the salesman and the product that he is offering.

Relationship selling or relationship marketing or relationship management focuses on the customer for establishing a long-term relationship. In acquiring the customer, the company would like to demonstrate to the account that it has the capabilities observe the account’s needs in a superior way, if the two parties can for a committed relationship. Kotler (1997) identified SPIN selling as technique to be used in relationship development.

As companies offer multiple products and services, the emphasis is moving from transaction marketing or selling to relationship marketing. Customers prefer suppliers who can sell and deliver a coordinated set of products and services to many locations if required. Relationship managers are given the responsibility to manage the sales of variety of products to customers on a long-term relationship basis. Relationship managers have to understand the needs of the customers on a long-term basis, make useful suggestions to them in respect of the product that their company is selling, and then monitor these accounts to make sure that their needs are being met with the products/services supplied to them and be ready to provide the after-sale-service as required. Losing a customer is very costly to the company. Relationship manager is entrusted with the responsibility of maintaining the long-term relationship.

Relationship manager is no doubt a salesman but with a different outlook and attitude. He needs a different training. He is responsible for the client, is the focal point of all the information about the client, is the provider of all the company information to the client, and he is the mobilizer of all the company services for satisfying the client.

In a properly implemented relationship management system, the organization will focus as much on managing its customers as on managing its products to fulfill the revenue targets.


Kotler, Philip (1997), Marketing Management, 9th Ed., Prentice Hall, New Jersey.

Marketing Strategies for Challenger Firms


Firms that are not market leaders in their industry or product category are trailing firms. One or two of them could be close competitors to the market leader and they can be termed as runner-up firms. These firms can take the role of challengers when they make aggressive efforts to further their market share or they can be termed followers when they keep quiet and maintain their market share.

There are successful trailing firms which challenged and became industry No. 1 firms. Canon is one such example in copiers. Toyota is now the world No. 1 company in automobiles; it displaced General Motors.

The challenger companies have to attack the leader, other comparable firms, and smaller firms in their bid to gain market share.

Attack has a greater probability of success when there customer dissatisfaction with the current leader. There is a gap in the market which the leader is not serving. Comparable firms can be successfully attacked when they are underfinanced and are charging excessive prices and customers are showing dissatisfaction. Similarly, underfinanced smaller firms can be attacked to gain market share.

With each attack, the challenger may hope to gain a reasonable increase in its market share.

The following attack strategies are possible.

Frontal Attack

An attack is called a frontal attack when the opponent’s strength is challenged head on. In marketing, the fight is done all fronts in market segments and areas where the opponent is currently strong. The general idea is that to win in a frontal attack, the challenger requires three times the fire power of the opposite side. What is fire power in marketing? Price of the product, quality of the product, sales effort, advertising effort, and service effort etc. are the various types of fire power in marketing. The challenger must be able to deploy superior fire power in the markets he is challenging.

Modified Frontal Attack

A modified frontal attack uses price as the challenging dimension. The challenger matches the opponent in other dimensions but will charge a lower price over an extended period.

Flank Attack

Attacking a weak position in the opponent’s force is flank attack. Challenger identifies the weak areas in the offering as well as marketing territories of the opponent and attacks those areas. A front attack may also be launched simultaneously, but the frontal attack is only to engage the opponent. But the real victory is won in the flanks. Market share gain in weak territories is the objective, but the opponent is forced to defend his share even in his strong territories and products.

Encirclement Attack

In this attack both strong areas and weak areas attacked simultaneously. This type of attack is more often done by a leader when challenged. When the leader makes an aggressive attack to gain market share from the trailing firms, he can use this strategy. Even other firms, can use this strategy when they are attacking a much smaller firm’s market share.

Guerilla Attack

Guerilla attacks consist of waging small, intermittent attacks on different marketing territories of the opposing firm. The aim is to harass and demoralize the opponent initially before launching the main attack.

Bypass Attack

In a bypass attack to gain market share, a firm identifies segments not served by the existing firms and makes efforts to gain market share.

The Marketing Firepower

Price discounts: The challenger can sell a comparable product at a lower price.

Cheaper goods: The challenger can come out with economy goods with lesser number of features. The strategy will succeed when there is significant number of buyers in need of lower priced product.

Prestige goods: A challenger can launch a higher quality product with more features.

Product proliferation: The challenger can offer a greater product variety.

Product innovation: the challenger can come out with an improve product.

Service innovation: Improvement in service offered to the buyers.

Distribution innovation: a new distribution outlet that offers additional convenience to buyers.

Process innovations: The challenger may have done a process innovation that gives better quality or lower cost and it is passed on to buyers.

Advertising innovation: The challenger may have innovative communications strategy that reaches and motivates larger number of potential customers resulting in higher sales.

Challenger needs to have a product-service offer or marketing mix advantage that is of value in the market place. Then he can use that advantage to gain market share by employing a suitable attack strategy.


Kotler, Philip (1997), Marketing Management, 9th Ed., Prentice Hall, New Jersey.

Friday, August 29, 2008

Brand Score Card

Article in the latest issue of marketing management, American Marketng Association

Ethical Norms and Values for Marketers

Kotler discussed ethics and social responsibility marketing in the last chapter of his book 'Marketing Management.'He gave the code or the statement of American marketing association. The recent code and reference to the proposed code are given here.

2004 statement

The American Marketing Association commits itself to promoting the highest standard of professional ethical norms and values for its members. Norms are established standards of conduct that are expected and maintained by society and/or professional organizations. Values represent the collective conception of what people find desirable, important and morally proper. Values serve as the criteria for evaluating the actions of others. Marketing practitioners must recognize that they not only serve their enterprises but also act as stewards of society in creating, facilitating and executing the efficient and effective transactions that are part of the greater economy. In this role, marketers should embrace the highest ethical norms of practicing professionals and the ethical values implied by their responsibility toward stakeholders (e.g., customers, employees, investors, channel members, regulators and the host community).


Marketers must do no harm. This means doing work for which they are appropriately trained or experienced so that they can actively add value to their organizations and customers. It also means adhering to all applicable laws and regulations and embodying high ethical standards in the choices they make.

Marketers must foster trust in the marketing system. This means that products are appropriate for their intended and promoted uses. It requires that marketing communications about goods and services are not intentionally deceptive or misleading. It suggests building relationships that provide for the equitable adjustment and/or redress of customer grievances. It implies striving for good faith and fair dealing so as to contribute toward the efficacy of the exchange process.

Marketers must embrace, communicate and practice the fundamental ethical values that will improve consumer confidence in the integrity of the marketing exchange system. These basic values are intentionally aspirational and include honesty, responsibility, fairness, respect, openness and citizenship.


Honesty— to be truthful and forthright in our dealings with customers and stakeholders.

· We will tell the truth in all situations and at all times.

· We will offer products of value that do what we claim in our communications.

· We will stand behind our products if they fail to deliver their claimed benefits.

· We will honor our explicit and implicit commitments and promises.

Responsibility—to accept the consequences of our marketing decisions and strategies.

· We will make strenuous efforts to serve the needs of our customers.

· We will avoid using coercion with all stakeholders.

· We will acknowledge the social obligations to stakeholders that come with increased marketing and economic power.

· We will recognize our special commitments to economically vulnerable segments of the market such as children, the elderly and others who may be substantially disadvantaged.

Fairness—to try to balance justly the needs of the buyer with the interests of the seller.

· We will represent our products in a clear way in selling, advertising and other forms of communication; this includes the avoidance of false, misleading and deceptive promotion.

· We will reject manipulations and sales tactics that harm customer trust.

· We will not engage in price fixing, predatory pricing, price gouging or “bait-and-switch” tactics.

· We will not knowingly participate in material conflicts of interest.

Respect—to acknowledge the basic human dignity of all stakeholders.

· We will value individual differences even as we avoid stereotyping customers or depicting demographic groups (e.g., gender, race, sexual orientation) in a negative or dehumanizing way in our promotions.

· We will listen to the needs of our customers and make all reasonable efforts to monitor and improve their satisfaction on an ongoing basis.

· We will make a special effort to understand suppliers, intermediaries and distributors from other cultures.

· We will appropriately acknowledge the contributions of others, such as consultants, employees and coworkers, to our marketing endeavors.

Openness—to create transparency in our marketing operations.

· We will strive to communicate clearly with all our constituencies.

· We will accept constructive criticism from our customers and other stakeholders.

· We will explain significant product or service risks, component substitutions or other foreseeable eventualities that could affect customers or their perception of the purchase decision.

· We will fully disclose list prices and terms of financing as well as available price deals and adjustments.

Citizenship—to fulfill the economic, legal, philanthropic and societal responsibilities that serve stakeholders in a strategic manner.

· We will strive to protect the natural environment in the execution of marketing campaigns.

· We will give back to the community through volunteerism and charitable donations.

· We will work to contribute to the overall betterment of marketing and its reputation.

· We will encourage supply chain members to ensure that trade is fair for all participants, including producers in developing countries.


Finally, we recognize that every industry and marketing subdiscipline (e.g., marketing research, e-commerce, direct selling, direct marketing, advertising) has its own specific ethical issues that require policies and commentary. An array of such codes can be accessed through links on the AMA web site. We encourage all such groups to develop and/or refine their industry and discipline-specific codes of ethics to supplement general norms and values.

2008 proposed statement

Strategic Control of Marketing

Each company has to periodically assess its marketing strategy or strategic approach to the market. Market effectiveness review and then a more detailed marketing audit are the tools available to help in strategic control of marketing.

Marketing Effectiveness

A company’s or a division’s marketing effectiveness is evaluated based on the degree to which it exhibits the five major attributes of marketing orientation of the company or division. The attributes are:

1. Customer philosophy
2. Integrated marketing organization
3. Adequate marketing information
4. Strategic orientation
5. Operational efficiency

Philip Kotler gave a questionnaire to assess marketing effectiveness in his book Marketing Management.

The questions employed in the instrument are:

1. Does management recognize the importance of designing the company to serve the needs and wants of chose markets?
2. Does management develop different offerings and marketing plans for different segments of the market?
3. Does management take a whole marketing system view (suppliers, channels, competitors, customers, and environment) in planning its business?
4. Is there high-level marketing integration and control of the major marketing functions?
5. Does marketing management work well with management in research, manufacturing, purchasing, logistics, and finance?
6. How well organized is the new-product development process?
7. When were the latest marketing research studies of customers, buying influences, channels and competitors conducted?
8. How well does management know the sales potential and profitability of different market segments, customers, territories, products, channels and order sizes?
9. What effort is expended to measure and improve the cost effectiveness of different marketing expenditures?
10. What is the extent of formal market planning?
11. How impressive is the current marketing strategy?
12. What is the extent of contingency thinking and planning?
13. How well is the marketing strategy communicated and implemented?
14. Is management doing an effective job with its marketing resources?
15. Does management show a good capacity to react quickly and effectively to on-the-spot developments?

In his instrument, Kotler gave a 3 point scale from 0 to 2. This gives maximum of 30 points for a company or division. Score above 16 is rated as good.

Marketing audit

Marketing audit is a more detailed review which is undertaken periodically and is a supplement to the effectiveness review.

Marketing review is a comprehensive, systematic, independent and periodic examination of a company’s or division’s marketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending plan of action to improve the company’s marketing performance.

Comprehensiveness indicates that all activities of marketing are audited and not trouble spots. Kotler defines auditing of specific activities as functional audit. Systematic audit indicates that well laid out audit plan is followed and the process is not done in an ad hoc manner. Independent auditor is carried out by persons from internal audit department with marketing expertise or external auditors with marketing expertise. Periodic auditing implies that it is done routinely and periodically and not in response to a problem. Management should not wail till the problem to set things in proper shape.

Marketing auditors have to meet customers, dealers and other outside groups also to find their assessment of the company and its marketing activities. The audit covers six major areas:

1. Marketing Environment
Task environment

2. Marketing Strategy Audit
Marketing objectives and goals

3. Marketing Organization Audit
Formal structure
Functional efficiency
Interface mechanism

4. Marketing Systems Audit
Marketing information system
Marketing planning system
Marketing control system
New product development system
Sales system

5. Marketing Productivity Audit
Profitability analysis
Cost effectiveness analysis

6. Marketing Function Audits
Advertising and Other communications
Sales promotion
Sales force

For further reading

Philip Kotler, "From Sales obsession to Marketing Effectiveness," Harvard Business Review, November-December 1977, pp.67-75.

Thursday, August 28, 2008

Performance Management Program


Performance planning is the first stage of the performance management process. During
performance planning, supervisors are expected to clarify performance expectations and clearly establish agreed upon goals/work priorities with each employee he/she supervises. This is also the time for job description review with the employee, especially if any changes have occurred since last reviewed.

Procedure for Performance Planning:

1. Supervisor meets with the employee.
2. Establish 3-8, collaboratively agreed upon goals/work priorities.
3. Establish criteria for successful performance of each goal/work priority.
4. Record goals/work priorities on Performance Planning Worksheet.

Policies Regarding Performance Planning:
If a supervisor does not initiate goal and/or work priority setting the employee
may develop his/her goals/work priorities and ask the supervisor to review them.
If the supervisor does not respond to either the employee’s proposed goals/work
priorities or the employee’s request for a meeting, after 90 days, the goals/work
priorities proposed by the employee become the goals/work priorities for the
current evaluation period.

If the supervisor and the employee cannot agree upon goals/work priorities, the
supervisor, after discussion with the employee, shall determine the goals/work


Regular communication about performance and coaching employees for improved performance are integral parts of performance management. These communications insure that the supervisor and the employee are working in agreed upon directions.

Coaching and feedback may take various forms; this includes observations, informal discussions, formal meetings and written documentation. Coaching and feedback are expected to occur on a regular basis throughout the performance management cycle. It is especially important for supervisors to provide feedback on performance issues in a timely manner and to discuss performance improvements and progress towards agreed upon goals/work priorities.

Policies Regarding Performance Documentation, and Feedback

It is expected that at least one communication (meeting, phone discussion, e-mail, written
review) will occur during the performance period, preferably during the middle six months. The Interim Review Form may be used to document discussion.


The Review and Development phase consists of evaluating the employee’s performance,
completing a written review, and conducting a two-way conversation focusing on results
achieved, areas of success and/or areas for improvement, future goals/work priorities and any developmental needs of the employee.

A McKinsey Study suggests that only 30 percent of employees say they receive feedback of real value in improving their performance. While the company handbooks or other descriptions often state the right goal for the performance process as improvement of performance, in practice in many companies performance appraisal is the order of the day.

There is a need to focus on performance improvement and the required coaching from the superior.

The performance goals have to be derived from the company goals. The superior and subordinate combination must have a deep understanding of how the company makes money, how the company’s customers make money, now the company can help its customers make money and what customers need to remain loyal.

Based on the agreed upon performance goals for the coming period, the superior has to determine the coaching requirements for his subordinate. Every superior has to remember that as a superior he has a coaching role. He has to set apart a certain amount of his time for coaching his team members. It will be a good idea if every supervisor is asked to prepare a coaching plan for his department as well as for each of his subordinates.

For further reading

Shekhar Purohit, The Performance Quest, The Economic Times, Corporate Dossier, 29 August, 2008, p. 2

Shekhar Purohit is Asia Pacific Leader for Executive Compensation and Corporate Governance, Hewitt Associates

Emerging Markets - Investment Banking - Growth Opportunities

The growing opportunity for investment banks in emerging markets

The growth opportunity ofr investment banks is in emerging markets.

Investment banks should look to emerging markets for the strongest growth opportunities in the next few years, recent McKinsey research shows.

Current trends include a relatively benign economic environment, a new breed of globally minded corporate players, and increased competition to develop strong local markets in the emerging world. Emerging Europe, Emerging Asia, Latin America (notably Brazil), and the Middle East are all areas expected to benefit.

Revenues from investment banking in emerging markets should grow in absolute terms even in a worst case. Under all scenarios, they should represent a bigger share of global revenues by 2010.

Wednesday, August 27, 2008

Excellent Bain Collection of Management Tools

Download from

Hallmarks of Success for Financial Services

Hallmarks of Success for Financial Services by 2010

Deloitte Report

The worldwide market for financial services is evolving rapidly, and is likely to look very different by the year 2010. Deloitte study identifies major market drivers and operational challenges that financial institutions will likely face over the next four years and pin-points the strategies and practices recommended to create the ‘Hallmarks of Success’. The key drivers and challenges include:

Market Drivers

New asset classes: Changing the center of gravity
Ageing population: Turning silver into gold
Payments: P&L pain or pride
Emerging Markets: Opportunities, but no guarantees
Operating Challenges
Offshoring: Releasing the value
Internal control: A springboard to improved operating performance
The struggle for growth: Process and service innovation provide the keys to sustained performance and enhanced customer relationships
Mindset matters: Tax, accounting and financial reporting

Operating Challenges

Offshoring: Releasing the value
Internal control: A springboard to improved operating performance
The struggle for growth: Process and service innovation provide the keys to sustained performance and enhanced customer relationships
Mindset matters: Tax, accounting and financial reporting

To learn more download the full study below from Deloitte site.

Strategies for building sustainable profits in wealth management

A Deloitte Report

Reconnecting for profit
Strategies for building sustainable profits in wealth management

The global private banking and wealth management market has enjoyed significant growth over recent years, riding a wave of high asset prices. With after-tax returns on equity averaging over 25 per cent in several major European markets, the sector remains the darling of a financial services industry in search of some good news amidst recent market turmoil. Despite the profitable performance, we ask in this report if wealth managers have used the growth period wisely. Have they sufficiently adapted their business models so that they can face the next five years confident of further growth?

"Reconnecting for Profit" summarises the results of a major qualitative study based on almost 50 in-depth discussions with private clients and leading wealth management executives. The report argues that forces are aligning that could test the resilience of wealth managers’ business models. In particular, our research suggests that as wealth managers have pushed forward with their growth strategies, a significant portion of the client base is disconnected from, and lacks trust in, wealth management institutions. The report highlights strategies for wealth managers to reconnect for profit and practical steps to aid transformation.

Download the report(2008) of Deloitte from

IT system Cost Reduction - BMO Capital Markets

Enhanced Application Presentation

As BMO Capital Markets opens new offices in Asia, Manta expects the company to reduce administrative and maintenance costs by centralizing applications on servers in Canada rather than maintaining installations on multiple servers and desktops in China and Hong Kong. BMO Capital Markets began this centralization process by publishing applications over the Web using Windows Server 2003 Enterprise x64 Edition and Citrix Presentation Server™ from Microsoft Terminal Services Partner Citrix Systems. Going forward, the company is excited about the enhanced Terminal Services features of Windows Server 2008, including Terminal Services RemoteApp.

BMO Capital Markets is investigating how the company can use the new Terminal Services features to increase the ease and speed of expanding into international markets by eliminating the need to deploy new infrastructure.

"Just by eliminating the need for infrastructure," Manta says, "we can save about $150,000 in capital costs for every office that we open in Asia, and we've opened four so far. That's more than half a million dollars already. When you include the costs of facilities and ongoing support, the savings will keep adding up."

Increased Performance and Cost Savings

BMO Capital Markets is using 64-bit architecture to achieve additional savings by reducing hardware requirements. "We can add memory and linearly scale out as much as we need to, up to 350 users per server, which is more than double the previous capacity," says Manta. "That's an immediate cost benefit because the average cost of a physical server platform is about $10,000. Windows Server 2008 should reduce the number of servers we need, as well as the associated support costs, by at least 30 percent—a savings of hundreds of thousands of dollars right off the bat."

BMO Capital Markets also anticipates that the stability of Windows Server 2008 will reduce systems failures and disaster recovery time, which will reduce downtime. "From what we have tested in production labs, Windows Server 2008 is stable," says Manta. "We expected to see this in the latest version of Microsoft's flagship operating system, and our tests of the prerelease versions have confirmed it."

Windows Server 2008

Windows Server 2008, with built-in web and virtualization technologies, enables you to increase the reliability and flexibility of your server infrastructure. New virtualization tools, web resources, and security enhancements help you save time, reduce costs, and provide a platform for a dynamic and optimized datacenter. Powerful new tools like IIS 7.0, Server Manager, and Windows PowerShell™, allow you to have more control over your servers and streamline web, configuration, and management tasks. Advanced security and reliability enhancements like Network Access Protection and the Read-Only Domain Controller option for Active Directory® Domain Services harden the operating system and protect your server environment to ensure you have a solid foundation on which to build your business.

Articles on Cost Reduction and Cutting by Consultants

Boston Consulting Group

June, 2008

A Principled Look at Cost Cutting

Many financial institutions have made progress in trimming overhead costs. But achieving truly meaningful reductions, with no “creep-back” over time, remains a challenge for most. BCG has developed an innovative cost-cutting method that involves establishing specific principles — rules that set limits and goals regarding organization and performance — through which head count reductions can be accomplished. Up to 20 percent of total FTE costs can be cut within six months using this method, which is known as Principles-Based Cost Reduction (PBCR).

Download detailed article from

January, 2008

Banking on Lean Advantage

Years ago, pioneers in other industries—notably the automotive industry—began seeing operations as a strategic asset to be leveraged, rather than a source of costs to be managed. They looked at operations holistically, rather than through a one-dimensional, cost-oriented lens. BCG has been using a similar approach, lean advantage, to help banks complement efficiency improvements—cost reductions as high as 30 percent—with impressive gains in customer satisfaction and loyalty, all while building internal capabilities to ensure continuous improvement.

Download detailed article from

Views of Accenture Consultant

“The industry does carry a lot of cost,” says Bob Gach, global managing director capital markets at Accenture in New York.

The concept of “sustainable cost reduction” takes a more holistic or systemic approach to cost reduction, according to Accenture’s spokesman. Instead of one department looking to reduce costs and another department working independently, all the departments work together as an enterprise to reduce costs. This makes the cost reduction more sustainable in the long run, says Accenture’s spokesman.

With this kind of approach, any large investment bank can take out $1 to $2 billion in costs, says Gach. “For the next tier down, the opportunity is $300 to $500 million,” says Gach.

What’s also inevitable is IT vendor consolidation, says Gach. With all the procurement deals on Wall Street, many firms are using dozens of vendors. Consolidating the number of relationships is part of the cost-reduction process, Gach suggests.

For more on the topic

Zero Marginal Transaction Cost: Securities Trading

Zero Marginal Competitive Cost: Securities Trading

Z/Yen, a consultancy firm, regularly benchmarks investment bank costs, headcounts and volumes to produce costs per trade covering:
FX & Money Market - Global FX, Currency Options, Money Market;
Equity & Debt - European Equities, SBL, Bonds, Repo, Listed & OTC Derivatives;
US Securities - Equities, Stock Borrow Loan, Bonds, Repo, Options & Futures.
According to the cost versus volume curves for Global Foreign Exchange, Global Money Markets, European Processed Equities and European Processed Bonds for the period from 2000 to 2002 developed by the firm, volumes increased markedly while operations costs per transaction fell:
Some of this per trade cost reduction is due to increased volumes being handled at decreasing marginal cost, largely through automation. For instance, the largest equity traders handled around 10M trades per annum in 1999, in 2002 they were handling nearer 25M; for bonds 250,000 trades per annum was large in 1999, now (2002) larger operations process over seven times as much at 1.8M; for FX in 2000, 3M trades was large, now an investment bank would need around 5M to be in the top league. With the “per trade” figure as the denominator, volume matters in getting cost/trade down. The pressure increases for those unable to get to efficient levels of capacity or unable to scale the costs of processes in line with demand. However, larger volumes, poorly processed could well increase costs and investment banking operations are increasingly more professional, increasingly focused on reducing exception, improving controls and risk management.

Cost reduction affects all areas, i.e. operations, operations IT, middle office/product control and middle office IT. In case of FX, cost per trade was just over $11 in 2000, now under $8. The cost squeeze has been felt in all cost components,

Pundits have long forecast the need for investment banking operations & IT to improve their performance markedly. As cost per trade falls precipitously, one obvious question arises, “how far can this go”? Some operations seem to be able to handle increasing volumes with little additional headcount, hitting 55,000 trades per head. Other operations can have as few as 12,500 trades per head. Investments in IT seem to pay off in numbers of trades per operations head, concentrated in the 2001 to 2002 period. More returns on IT seem likely to arrive.

Z/Yen Limited is a risk/reward management firm helping organisations make better choices. Z/Yen undertakes strategy, finance, systems, marketing and intelligence projects in a wide variety of fields (, such as developing an award-winning risk/reward prediction engine, helping a global charity win a good governance award or benchmarking transaction costs across global investment banks.

Financial Services Articles - Z/Yen

Very interesting articles on issues related to financial services companies

To download articles go to

Financial Services Articles


Michael Mainelli, “The Religion Of Regulation: Too Big To Succeed”, Journal of Risk Finance, Volume 9, Number 4, Emerald Group Publishing Limited (August 2008).

Michael Mainelli, “Caseless Wonders: Finance Courses and Ethics” , Finance & The Common Good/Bien Commun, Number 30 – 1/2008, pages 81-90, Observatoire de la Finance (June 2008).

Michael Mainelli, “The Pond For Markets: Social And Local”, Journal of Risk Finance, Volume 9, Number 3, pages 303-305, Emerald Group Publishing Limited (May 2008).

Mark Yeandle, Alexander Knapp and Michael Mainelli, "The Global Financial Centres Index", The Handbook Of World Stock, Derivative & Commodity Exchanges, pages xxxv-xxxviii, Mondovisione (2008).

Michael Mainelli, “Liquidity = Diversity”, Journal of Risk Finance, Volume 9, Number 2, pages 211-216, Emerald Group Publishing Limited (March 2008).

Mark Yeandle, Michael Mainelli and Ian Harris, The Global Financial Centres Index - 3 , 80 pages, City of London Corporation (March 2008).

Michael Mainelli, “Dumb On Non-Dom”, Financial World, pages 12-13, IFS School of Finance (February 2008)

Michael Mainelli, “Derivative Processing Counts”, Journal of Risk Finance, The Michael Mainelli Column, Volume 9, Number 1, pages 92-95, Emerald Group Publishing Limited (January 2008).

Michael Mainelli, “Chapter 45: European Union – Regional Guidance”, Governance, Risk And Compliance Handbook, Anthony Tarantino (ed), pages 613-625, John Wiley & Sons (2008).


Michael Mainelli and Jan-Peter Onstwedder (eds), The London Accord: Making Investment Work For The Climate, City of London Corporation (2007).

Michael Mainelli and James Palmer, “A Portfolio Approach To Climate Change Investment And Policy”, The London Accord: Making Investment Work For The Climate, City of London Corporation (2007).

Mark Yeandle, Mike Young and Ian Harris, "Warm Game: A Game For All Seasons", The London Accord: Making Investment Work For The Climate, City of London Corporation (2007).

Michael Mainelli, "Guest Comment: The Dangers of Demonising Non-Doms", eFinancialCareers (10 December 2007).

Michael Mainelli, “The Rules Of Practical Principles”, Journal of Risk Finance, The Michael Mainelli Column, Volume 8, Number 5, pages 508-510, Emerald Group Publishing Limited (October 2007).

Mark Yeandle, Michael Mainelli and Ian Harris, The Global Financial Centres Index - 2 , 78 pages, City of London Corporation (September 2007).

Michael Mainelli, “Chapter 10: Correlation Causes Questions: Environmental Consistency Confidence In Wholesale Financial Institutions”, Frontiers of Risk Management: Key Issues and Solutions, Dennis Cox (ed), pages 94-100, Euromoney Books (2007).

Michael Mainelli, “Market of Markets: The Global Financial Centres Index”, Journal of Risk Finance, The Michael Mainelli Column, Volume 8, Number 3, pages 313-319, Emerald Group Publishing Limited (June 2007).

Michael Mainelli, “Start Spreading The News … London’s Calling”, Financial Services Review, pages 16-17, Association of Chartered Certified Accountants (May 2007).

Michael Mainelli, “Louis Bachelier’s Theory of Speculation” (Louis Bachelier’s Theory of Speculation: The Origins of Modern Finance translated and with commentary by Mark Davis and Alison Etheridge), London Mathematical Society Newsletter, Number 359, pages 21-22 (May 2007).

Michael Mainelli, “The London Accord: From Copenhagen Conundrum To Climate-Change Investment”, Journal of Risk Finance, The Michael Mainelli Column, Volume 8, Number 2, pages 198-201, Emerald Group Publishing Limited (March 2007).

Michael Mainelli and Mark Yeandle, The Global Financial Centres Index - 1 , 68 pages, City of London Corporation (March 2007).

Michael Mainelli, "Cash In, Carbon Out?", Financial World, IFS School Of Finance (February 2007).

Michael Mainelli and Mark Yeandle, “The Best Execution: Trader or Client?” , Fund AIM, Volume 1, Number 1, pages 43-46, Investor Intelligence Partnership (January 2007).


Michael Mainelli, "Place Your Bets” (Investor Relations At Online Gambling Firms), Real IR, page 12, Caspian Publishing Limited (November 2006).
Michael Mainelli, "More Of The Same? Reinforcing People's Success By Risking Statistics", Powerchex (September 2006).
Michael Mainelli and Joshua Ronen, “Put Your Money Where Your Audit Is: Financial Statement Insurance In The UK?”, Journal of Risk Finance, The Michael Mainelli Column, Volume 7, Number 4, pages 446-450, Emerald Group Publishing Limited (August 2006).
Michael Mainelli and Mark Yeandle, “Best Execution Compliance: Towards An Equities Compliance Workstation”, Journal of Risk Finance, Volume 7, Number 3, pages 313-336, Emerald Group Publishing Limited (June 2006).
Michael Mainelli and Mark Yeandle, “Best Execution Compliance: New Techniques for Managing Compliance Risk”, Journal of Risk Finance, Volume 7, Number 3, pages 301-312, Emerald Group Publishing Limited (June 2006).
Michael Mainelli and Joshua Ronen, "Accounting: Progress May Lie In Insurance" (Put Your Money Where Your Audit Is: Financial Statements Insurance in the UK?) , Financial World, pages 38-39, Institute of Financial Services and Centre for the Study of Financial Innovation (May 2006).
Jeremy Smith "Evaluating Risk and Efficiency in Corporate Actions Processing at Major Investment Banks" , Financial Services Research, pages 46-49, Financial Services Research Limited (April 2006).
Mark Yeandle "Best Compliance Execution Automation" , Financial Services Research, pages 80-82, Financial Services Research Limited (April 2006).
Michael Mainelli, "Global Financial Centers: One, Two, Three ... Infinity?", Journal of Risk Finance, The Michael Mainelli Column, Volume 7, Number 2, pages 219-227, Emerald Group Publishing Limited (March 2006).
Michael Mainelli, "The Copenhagen Conundrum - Doesn't Risk/Reward Analysis Matter?", Journal of Risk Finance, The Michael Mainelli Column, Volume 7, Number 1, pages 101-104, Emerald Group Publishing Limited (January 2006).


Michael Mainelli, "When Risk Pays Off" , Financial Services Review, Number 76, pages 8-9, Association of Chartered Certified Accountants (December 2005).
Mark Yeandle, Michael Mainelli and Adrian Berendt, The Competitive Position of London as a Global Financial Centre , 67 pages, Corporation of London, (November 2005).
Michael Mainelli, "Anti-anti-money Laundering: "Feed-back or "Fed-up"?", Journal of Risk Finance, The Michael Mainelli Column, Volume 6, Number 4, pages 368-372, Emerald Group Publishing Limited (August 2005).
Mark Yeandle, Michael Mainelli, Adrian Berendt and Brian Healy Anti-Money Laundering Requirements: Costs Benefits and Perceptions , City Research Series, 71 pages, Corporation of London (June 2005).
Michael Mainelli, "Competitive Compliance: Manage and Automate, or Die", Journal of Risk Finance, The Michael Mainelli Column, Volume 6, Number 3, pages 280-284, Emerald Group Publishing Limited (June 2005).
Michael Mainelli, "The (Mis)Behavior of Risk Managers: Recognizing Our Limitations" (implications of chaos and fractal criticisms), Journal of Risk Finance, The Michael Mainelli Column, Volume 6, Number 2, pages 177-181, Emerald Group Publishing Limited (April 2005).
Michael Mainelli, “Preying on the Fear Factor" (paying for perceived non-executive risks), Accountancy Age, page 26, VNU Business Publications (17 February 2005).
Michael Mainelli, “Standard Differences: Differentiation through Standardisation?” (ISO9001, SAS70 and management systems), Journal of Risk Finance, The Michael Mainelli Column, Volume 6, Number 1, pages 71-78, Emerald Group Publishing Limited (January 2005).


Michael Mainelli and Sam Dibb, "Betting on the Future: Online Gambling Goes Mainstream Financial" , Centre for the Study of Financial Innovation, Number 68, 34 pages, ISBN: 0-9545208-5-8 (December 2004).
Michael Mainelli, "Personalities of Risk/Reward: Human Factors of Risk/Reward and Culture", Journal of Financial Regulation and Compliance, Volume 12, Number 4, pages 340-350, Henry Stewart Publications (November 2004).
Michael Mainelli, "All or Nothing: Product Control Goes Global or Local", Balance Sheet, The Michael Mainelli Column, Volume 12, Number 4, pages 42-44, Emerald Group Publishing Limited (2004).
Michael Mainelli, “Finance Looking Fine, Looking DAPR: The Importance of Dynamic Anomaly and Pattern Response”, Balance Sheet, The Michael Mainelli Column, Volume 12, Number 5, pages 56-59, Emerald Group Publishing Limited (October 2004).
Ian Harris, Sam Dibb and Michael Mainelli, “Bet Your Shirt: What's the Difference Between Insurance and Gambling” ( - 7Mb), AIRMIC News, page 7, The Association of Insurance and Risk Managers (October 2004).
Michael Mainelli and John Maitz, “Make Up for Lost Time” , (insurers and dynamic anomaly and pattern recognition), Global Insurance Bulletin, pages 18-20, Risk & Insurance Research Group (June 2004).
Jonathan Howitt, Michael Mainelli and Charles Taylor, “Marionettes, or Masters of the Universe? The Human Factor in Operational Risk” , Operational Risk (A Special Edition of The RMA Journal), pages 52-57, The Risk Management Association (May 2004).
Michael Mainelli, “Bracing for Zero Marginal Competitive Cost: Investment Banking Restructures”, Balance Sheet, The Michael Mainelli Column, Volume 12, Number 3, pages 48-51, Emerald Group Publishing Limited (May 2004).
Michael Mainelli, “Toward a Prime Metric: Operational Risk Measurement and Activity-Based Costing” , Operational Risk (A Special Edition of The RMA Journal), pages 34-40, The Risk Management Association (May 2004).
Michael Mainelli, "Ethical Volatility: How CSR Ratings and Returns Might be Changing the World of Risk", Balance Sheet, The Michael Mainelli Column, Volume 12, Number 1, pages 42-45, Emerald Group Publishing Limited (January 2004).


Michael Mainelli, "All Too Visible Hands: Liquidity versus Transparency on Exchanges", Balance Sheet, The Michael Mainelli Column, Volume 11, Number 4, pages 65-67, MCB University Press (November 2003).
Michael Mainelli, "Assessing Credit Rating Agencies: Quis Aestimat Ipsos Aestimatores?", Balance Sheet, The Michael Mainelli Column, Volume 11, Number 3, pages 55-58, MCB University Press (August 2003).
Michael Mainelli, "PFI and PPP: Could They Result in Enron UK?", Balance Sheet, The Michael Mainelli Column, Volume 11, Number 2, pages 39-43, MCB University Press (July 2003).
Michael Mainelli, "Risk/Reward in Virtual Financial Communities", Information Services & Use, Volume 23, Number 1, pages 9-17, IOS Press (2003).
Stephen Martin and Michael Mainelli, "Why Bother to Be Better? Strategically Stagnant Personal Current Accounts", Journal of Strategic Change, Volume 12, Number 4, pages 209-221, John Wiley & Sons (June-July 2003).
Michael Mainelli, Ian Harris and Alan Helmore-Simpson, "The Auditor's Cross Subsidy" (statistical modelling of audit prices), Strategic Planning Society E-Newsletter, Article 1 (June 2003). Also published as "Anti-dumping Measures & Inflation Accounting: Calculating the Non-Audit Subsidy", (19 June 2003).
Michael Mainelli, “Is Small Beautiful? Investment in Smaller Quoted Companies”, Balance Sheet, The Michael Mainelli Column, Volume 11, Number 1, pages 68-71, MCB University Press (March 2003).
Anthony Hene and Michael Mainelli, “Spend for Glory or Reserve Wastefully: Asymmetric Gain and Loss Recognition”, Charity Finance, pages 28-30 (February 2003).


Fiona Buxton, Michael Mainelli, Robert Pay, Professor David Storey, Stephen Wells, "Institutional Investment and Trading in UK Smaller Quoted Companies" , The Quoted Companies Alliance, 54 pages, (October 2002).
Michael Mainelli, "Industrial Strengths: Operational Risk and Banks", Balance Sheet, Volume 10, Issue 3, MCB University Press (August 2002).
Michael Mainelli and Ian Harris, "Balancing the Odds: Stochastic Accounting", Balance Sheet, Volume 10, Number 2, pages 22-27, MCB University Press (2002).

Jan-Peter Onstwedder and Michael Mainelli, "Enter the Specialists" (credit derivative market transformation), Risk Professional, Issue 2/10, pages 32-35, Informa Group plc (December 2000/January 2001).
Jeremy Smith and Ian Harris, "ASPs Bite at the Banks", Conspectus, page 29, Prime Marketing Publications (December 2000).

Michael Mainelli, "Taking the Measure of Risk: Benchmarking Risk Management", Handbook of Risk Management, Issue 35, pages 5-8, Croner Publishing (10 December 1999).
Michael Mainelli, "Wither the FD? Hello Risk/Reward Director!", Handbook of Risk Management, Issue 30, pages 5-7, Kluwer Publishing (12 July 1999).

Michael Mainelli and Martin Dooney, "Military Minds Train on Financial Targets", Investment & Pensions Europe, page 14 (March 1997).


Michael Mainelli and Wyatt Ramsdale, "Strategic Implications of Resource Accounting", Executive Agency Overview, Issue 5, pages 17-19 (May 1996). Also reprinted in The Defence Yearbook 1997, pages 98-101, Public Sector Information Ltd.
Michael Mainelli, Ian Harris and David Highton, "Save it for a Rainy Day: Setting Charity Reserve Levels", NGO Finance, pages 62-65 (April 1996).

SEBI (Intermediaries) Regulations 2008 - India

The regulations were notified in May 2008.

They can be downloaded from






1.1 Investors/Clients
Every intermediary shall make all efforts to protect the interests of investors and shall render the best possible advice to its clients having regard to the client’s needs and the environments and his own professional skills.

1.2 High Standards of Service

An intermediary shall ensure that it and its key management personnel, employees,
contractors and agents, shall in the conduct of their business, observe high standards of integrity, dignity, fairness, ethics and professionalism and all professional dealings shall be affected in a prompt, effective and efficient manner.
An intermediary shall be responsible for the acts or omissions of its employees and
agents in respect to the conduct of its business.

1.3 Exercise of Due Diligence and no Collusion

An intermediary shall at all times render high standards of service, exercise due skill and diligence over persons employed or appointed by it, ensure proper care and
exercise independent professional judgment and shall not at any time act in collusion
with other intermediaries in a manner that is detrimental to the investor(s).

1.4 Fees

An intermediary shall not increase charges/ fees for the services rendered without
proper advance notice to its clients/investors.


2.1 Disbursal of Amounts

An intermediary shall be prompt in disbursing dividends, interests or any such accrual income received or collected by it on behalf of its clients/investors.


3.1 An intermediary shall ensure that adequate disclosures are made to the
clients/investors in a comprehensible and timely manner so as to enable them to make
a balanced and informed decision.

3.2 An intermediary shall not make any misrepresentation and ensure that the information provided to the clients/investors is not misleading.

3.3 An intermediary shall not make any exaggerated statement whether oral or written to the client/investor, either about its qualification or capability to render certain services or its achievements in regard to services rendered to other clients/investors.

3.4 An intermediary shall not divulge to anybody, either orally or in writing, directly or indirectly, any confidential information about its clients/investors, which has come to its knowledge, without taking prior permission of its clients/investors except where such disclosures are required to be made in compliance with any law for the time being in force.


4.1 An intermediary shall avoid conflict of interest and make adequate disclosure of his interest and shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner. An intermediary shall make appropriate disclosure to the client/investor of its possible source or potential areas of conflict of duties and interest while acting as an intermediary which would impair its ability to render fair, objective and unbiased services.

4.2 An Intermediary or any of its directors, or employee having the management of the
whole or substantially the whole of affairs of the business, or an associate of the
intermediary shall not, either through its account or their respective accounts or
through their family members, relatives or friends indulge in any insider trading.


5.1 An Intermediary shall ensure that good corporate policies and corporate governance is in place. It shall not engage in fraudulent and manipulative transactions in the securities listed on any stock exchange in India and shall not indulge in any unfair competition (including resorting to unfair means for inducing another intermediaries’clients) which is likely to harm the interests of other intermediaries or investors or is likely to place such other intermediaries in a disadvantageous position while competing for or executing any assignment.

5.2 An Intermediary shall take adequate and necessary steps to ensure that continuity in data and record keeping is maintained and that the data or records are not lost or destroyed. It shall also ensure that for electronic records and data, up-to-date back up is always available with it.

5.3 An Intermediary shall not be a party to or instrumental in or indulge in—
a) creation of false market for securities listed or proposed to be listed on any
stock exchange in India;
b) price rigging or manipulation of prices of securities listed or proposed to be
listed on any stock exchange in India; or
c) passing of unpublished price sensitive information in respect of securities
which are listed or proposed to be listed on any stock exchange to any person
or intermediary, or
d) any activity for distorting market equilibrium or which may affect the smooth
functioning of the market or for personal gain.

5.4 An Intermediary shall co-operate with the Board, or any authority designated by the Board, as and when required and shall not make any untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board or neglect or fail or refuse to submit to the Board or other agencies with which it is registered, such books, documents, correspondence and papers or any part thereof as may be demanded/requested from time to time.

5.5 An Intermediary shall ensure that any change in registration status /any penal action taken by Board or any material change in financials which may adversely affect the interests of clients/investors is promptly informed to the clients/investors and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors or as per the instructions of the Board and the provisions of the relevant regulations.

5.6 An Intermediary shall maintain an appropriate level of knowledge and competency
and abide by the provisions of any act, regulations, circulars and guidelines of the
Central Government, the Reserve Bank of India, the Board, the stock exchange or any
other applicable statutory or self regulatory or other body, as the case may be, and as may be applicable to the Intermediary in respect of the business carried on by such Intermediary. An Intermediary shall also comply with the award of the Ombudsman
passed under the Securities and Exchange Board of India (Ombudsman) Regulations,

5.7 An Intermediary shall ensure that the Board is promptly informed about any action,legal proceedings, etc., initiated against it in respect of any material breach or noncompliance by it, of any law, rules, regulations, and directions of the Board or of any other regulatory body.


6.1 An Intermediary shall have internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations, its clients,investors and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.

6.2 An Intermediary also registered with the Board in any other capacity/ category shall endeavour to ensure that arms length relationship is maintained in terms of both manpower and infrastructure between the activities carried out as an Intermediary and other permitted activities.

6.3 An Intermediary shall establish and maintain adequate infrastructural facility to be able to discharge its services as such intermediary to the satisfaction of
clients/investors, and the operating procedures and systems of the intermediaries shall be well documented and backed by operations manuals.

6.4 An Intermediary shall create and maintain the records of all documents and data in their in custody in such manner that the tracing of such document or data is facilitated in the event of loss of original records or documents for any reason.

Top 10 Sovereign Funds

Country --- fund-------------------Amount(USD Bn)------Inception

UAE-------- Abu Dhabi Inv. Auth(ADIA)-- 875-----1976

Singapore--Govt. Sing. Inv. Corp.------ 330-----1981

Norway-----Govt. Pension Fund Global----322-----1990

Saudi Arabia-Various Funds--------------300-----NA

Kuwait-----Kuwait inv. Authority--------250-----1953

China------China Inv. Co. Ltd.----------200-----2007

Hong Kong--Hong Kong Mon. Aut. Inv.Por--140-----1998

Russia-----Stab.Fund. Russian Fed.------127-----2003

China------Cen. Hujin Inv. Corp.--------100-----2003

Singapore--Temasek Holdings-------------108-----1974

Sovereing Wealth Fund Concept

Tuesday, August 26, 2008

Investment Banking: Addressing the Management Issues


Investment Banking: Addressing the Management Issues (Hardcover)
by Steven I. Davis (Author

• Hardcover: 288 pages
• Publisher: Palgrave Macmillan (February 8, 2003)

Cost Reduction Measures – Investment Banks – 2008

Globally financial firms have reduced head count by 1,01,250 since beginning of credit crunch.


Citigroup has cut about 14,000 jobs in the first half of 2008.
Citigroup is scaling down external training.
Purchases of computer hardware and software needs to be preapproved.
Blackberry buying requires preapproval.
All nonclient travel requires preapproval.
Off site meetings of employees cutback.
Colour copying limited to client presentations
Efficiency in spending is priority.

(According to contents of an internal memo published in the UK’s Daily Telegraph.)

Deutsche Bank

Business meas must not exceed 50 pounds per person ($92).
Dealmakers to get approval for taxi journeys in advance from their manager.
(According to Independent news paper)


UBS has made cost reduction program as a part of its new organization change initiative

Operating expenses

2nd Quater 08 vs 2nd Quarter 07:

Total operating expenses declined by 36%, falling to CHF 2,931 million from CHF 4,565 million.

A 56% decline in personnel expenses, to CHF 1,494 million, reflects lower accruals for performance-related compensation and an adjustment relating to changes to the forfeiture provisions of future equity ownership plan (EOP) awards. Salary costs also declined as personnel were reduced by 2,662 full-time equivalents.

General and administrative expense decreased by 17% to CHF 784 million, with reductions in a number of expense lines. The most notable reductions were in travel and entertainment, and IT and outsourcing, and are largely attributable to the ongoing cost reduction program.


Merrill Lynch

1st quarter 2008

Compensation Expenses
Compensation and benefits expenses were $4.2 billion for the first quarter of 2008, down 14 percent from $4.9 billion in the first quarter of 2007, due to a decline in compensation expense accruals reflecting lower net revenues.

The firm intends to reduce its headcount from year-end levels by approximately 4,000 employees, or 10 percent, excluding FAs and investment associates. Headcount reductions will be targeted in GMI and support areas, and will not impact the firm's financial advisor or investment associate population. Cost savings from this reduction are expected to be approximately $800 million on an annualized basis, including approximately $600 million for the remainder of 2008. As a result, the firm expects to record a restructuring charge of approximately $350 million in the 2008 second quarter.


Criticism of Federal Reserve - Becoming Strident

Willem Buiter, Ex-Chief Economist at the European Bank for Reconstruction and Development criticized Fed in a paper "Central Banks and Financial Crises" presented at Jackson Hole economics symposium.

He charged the US Fed with messing up its response to the credit crisis and being close to and captured by interests on Wall street.

He argues that rate cuts the Fed has announced so far are due to Fed's desire to stop the slide in share prices, a desire that reflected too close proximity to Wall street.

Brave and Confident Brands


1. The brand can actually back the claim it is making.

2. The brand is willing to focus on values and insights tat bring the brand alive rather than just bringing in revenue.

3. The brand creats an idea that theoretically goes against the category theme.

Of course a brand cannot be deeded confident or brave on the basis on one campaign.

Companies have to make that confidence and boldness an aspect of their business model.

Mint, 27 August 2008

Monday, August 25, 2008

Beating the Odds of Brand Growth

Some mature brands grew through innovating product formulas, others through repositioning.

Packaging innovation alone could make a difference.

Innovate around your core and shout about it, and you're likely to unleash growth potential.

Updated Study in 2008

Learning from the lucky thirteen
Brandweek 05/26/08
by John Blasberg and Ivan Hindshaw

There are two strategic steps that, year after year, have been proven to help brands outperform their competitors. It can't be all that difficult to remember two of anything, and yet we consistently see so many companies fail to stick to those two steps.

1. Don't let the wrong innovations slip through

2. Have ongoing commitment to the post-launch through advertising.
You have to shout your innovation


Beating the Odds of Brand Growth
by John Blasberg and Vijay Vishwanath

For more detailed reading
Harvard Business Review, by John Blasberg and Vijay Vishwanath June 2003.

Learning from the lucky thirteen
Brandweek 05/26/08
by John Blasberg and Ivan Hindshaw

Sunday, August 24, 2008

Principles of Communication

Four critical areas of communication are message quality, conditions for reception, maintenance of integrity of organized effort, and taking advantage of informal organization. Principles useful for establishing good communications are:

1. Principle of clarity: Communicate in commonly understood language. It requires familiarity with language patterns of subordinates, peers and superiors. Following this principle will avoid badly mistakes in messages like badly expressed content, and unclarified assumptions etc.

2. Principle of attention: This principle is for the listener. Give attention to the receiving communication.

3. Principle of integrity: This principle relates to the purpose of communication. To a manager, a communication is always a means, never an end. It is one his tools for securing and maintaining cooperation in achieving enterprise objectives.

4. Principle of strategic use of informal organization: The informal organization is a reality and managers need to use this channel intelligently. But no orders should be given through this channel.

Adherence to these principles requires voluntary application by all members of the organization. No one can point out to dollar savings, for the cost of poor communication cannot be calculated. But all agree that there will be cost improvements from better communications.

For further reading

Rogers, C.R., and F.J. Roethlisberger, “Barriers and Gateways to Communication” Harvard Business Review, Vo. 30, No.4, July-August, 1952, pp. 46-52.

Articles/Knols on Selling Process

I posted articles on various steps in selling process. The starting article is

1. Selling Process

As Knol is a wiki platform readers can edit the article for improving it.

Knols on Organization Behavior Topics

Knol is google wiki platform for electronic publishing.

I initiated an effort to develop a management encyclopedia on it.

The articles on behavioral science is started with an article on leadership theories.

Sunday, August 17, 2008

Auction Rate Securities - The Instrument

Auction rate securities is a financial innovation or a security market innovation that seems to be failed one at the moment. We need to understand how it was developed and made to be a sufficiently big market. Then we need to understand what factors led to its failure. The security market intermediaries gained some money from the instrument. But now they are losing some money from it.

We need to understand the security first

What is an Auction Rate Security?
Auction Rate Securities (ARS) are securities with long-term maturities that are structured with the possibility of short-term holding periods, this is attempted by use of a Dutch Auction. A Dutch Auction takes place at the beginning of each holding period, which determines the coupon/dividend. At the end of each holding period, a new Dutch Auction is held, determining the coupon/dividend for the next holding period. Investors can sell, buy (if available) or continue to hold their Auction Rate Security at each auction. The length of each holding period is determined at the time of the security’s original issuance. Typical holding periods are 7, 28 and 35 days.
Overview of Morgan Keegan’s Auction Rate Program
Morgan Keegan’s Auction Rate Program will use long- dated bonds that provide short-term interest rates and liquidity determined through the Dutch Auction process. Morgan Keegan will be using either a 7, 28 or 35-day auction rate period. The coupon/dividend is paid to the ARS holder the day after the 7, 28 or 35-day holding period. The majority of ARS bonds that Morgan Keegan offers have an investment grade underlying rating. An investor looking for competitive tax-free returns may want to consider ARS. Major features of Municipal Auction Rate Securities include:
• Investment grade rating (most, but not all)
• Dividends paid after 7, 28 or 35 days
• Rates reset every 7, 28 or 35 days
There are important distinctions between ARS and short term investments. ARS provide (but do not guarantee) liquidity at par through 7, 28 and 35-day auctions. By contrast, tax-exempt money market funds provide daily liquidity at net asset value. Commercial paper is an unsecured promissory note, and does not offer guaranteed liquidity. Treasury bills are backed by the full faith and credit of the U.S. government and provide ready liquidity.
Objectives of Auction Rate Securities
• Competitive yields versus traditional money market instruments
• Liquidity based on Auction
• Preservation of principal
• No fees or expenses
Principal and Dividend Safety
Bond Insurance
Bond Insurance will guarantee the regularly scheduled payment of interest on the insured bonds on the scheduled interest payment dates and principal at the stated maturity.
If the auction is not successful (failed auction) the issuer is still responsible for paying the bond holder interest. The bond insurer is only responsible for paying interest and principal in case if issuer default. However, not all auction rate securities offered by Morgan Keegan carry insurance and not all insurers are rated the same. Principal will be paid to the investor immediately following the first successful auction, as a secondary market develops, or at the stated maturity.
Auction and Market Liquidity
ARS holders may instruct their advisors to offer their shares for sale at the next 7, 28 or 35-day auction. If there is a lack of buyers for all available shares, then the auction will be postponed (failed auction). All holders will be awarded a tax-free dividend based on current taxable market rates or in cases of a failed rate, until the next successful auction date. The $25,000 share price remains constant, providing a “$1 in, $1 out” feature that means the principal received upon sale will always equal the amount invested, but could change with market demand.
Money Fund Eligibility
ARS are not eligible for sale to Money Market funds subject to rule 2(a)7 governing money fund investment guidelines.
Purchase Facts
Minimum Purchase:
One share minimum, $25,000 per share.
No Load:
There is no load to shares of ARS purchased or sold at auction.
To Purchase at Auction
To buy ARS at auction, advisors and investors should first discuss the lowest acceptable yield level and the possibility of a failed auction. All buy orders must specify:
• The number of shares desired ($25,000 per share)
• The desired yield
Purchases are submitted through Morgan Keegan’s Retail Fixed Income Trading Desk. If the desired rate is accepted at auction, investors will receive either that rate or a higher rate. Settlement is the next business day. If the desired rate is higher than the rate derived through the auction process, the order will not be filled.
Subsequent Auctions
At subsequent auctions, shareholders may submit one of two orders:
• Sell shares
• Hold shares, accepting the new rate established by the auction.
For additional information, please contact your financial advisor for a copy of the Morgan Keegan Auction Rate Securities Practices and Procedures.
Auction Rate Risks
Investors should be aware that investing in auction rate securities involves certain risks that differentiate such securities from money market investment instruments.
• Liquidity Risk — The ability of an investor to dispose of a share of an auction rate security may be largely dependent on the success of the auction.
There is no assurance that any particular auction will be successful, and neither the issuer nor any broker dealer is obligated to take any action to ensure that an auction will be successful. In the absence of successful auctions, there is no assurance that a secondary market for the auction will develop, or if such a market does develop, that shares will trade at or close to par.
• Purchase or sale through Dutch Auction process — A Dutch Auction is a competitive bidding process designed to determine a rate for the next term, such that all sellers sell at par and all buyers buy at par. A Dutch Auction is designed to set the “equilibrium” rate at which supply equals demand.
• The dealer may bid in the auction and the issuer may purchase in the auction.
In general, dividends on shares of municipal auction rate securities are exempt from regular federal income tax, but may be subject to the application of the federal alternative minimum tax.
Municipal bonds used in Morgan Keegan’s Auction Rate Program will provide federal tax exemption on the coupon/dividend payment and can provide state tax exemption. This formula:

1.00 – Federal Tax Rate
will provide an approximate taxable equivalent yield and allows investors to compare tax-exempt yields to taxable yields.
The Tax-Free Advantage
Investors would have to earn considerably more from a taxable investment to achieve the same after-tax income as from tax-free ARS.
The securities and other investment products described herein are: 1) Not insured by the FDIC, 2) Subject to investment risks, including possible loss of principal amount invested, 3) Not deposits or other obligations of, nor guaranteed by Morgan Keegan & Company, Inc., Regions Financial Corporation or any other affiliates.
Copyright © 2008 Morgan Keegan & Co., Inc. All rights reserved. Last posted on Aug 15, 2008
accessed on 17th August 2008


Tuesday, August 5, 2008

Moral Common Sense for Executives

Moral Common Sense

A. Avoid harming others
B. Respect the rights of others
C. Do not lie or cheat
D. Keep promises and contracts
E. Obey the law
F. Prevent harm to others
g. Help those in need
H. Be fair
I. Reinforce these imperatives in others

K.E. Goodpaster
Ethics in Management
Harvard Business School Press

Saturday, August 2, 2008

IMF Global Financial Stability Report Update July 2008

Losses of the Financial system due to Subprime troube $1 trillion

In April, the IMF said that banks and other financial institutions could lose $1 trillion from the credit crisis as mortgage-backed assets lost most of their value - and it is still sticking to that estimate.

The current report says that that the banks have now acknowledged these risks and written off nearly $500bn worth of assets.

IMF Global Financial Stability Report Quarterly Update July 2008

At the moment however with delinquencies and foreclosures raising rapidly and house prices continuing to fall, a bottom for the housing market in the United States is not yet visible and the credit deterioration is spreading to even prime mortgage loans. Housing prices are also softening in a number of European economies, prompting concerns over future loan losses in the mortgage, construction, and commercial property sectors in those countries.

On the positive side, despite banks' write-downs now exceeding $400 billion in aggregate, banks have generally been successful in raising capital and balance sheets of the banks are adjusting. In fact, the equity raised covers upwards of three-fourths of the write-downs to date . Regarding the estimate of total mark-to-market losses that we published in our April GFSR, market prices of asset-backed securities and the ongoing delinquency experience give us little reason to change these estimates, so we have not revised the estimates on this occasion.

A question and clarification in the press conference by IMF July 2008

QUESTION: I just wanted one quick point of clarification. The loss that you were talking about that you haven't adjusted is the $1 trillion one.

MR. CARUANA: Yes, the figure that I was referring to in terms of losses was the calculation that we presented in our April GFSR of nearly $1 trillion in losses. We think that this figure is probably right and we have not changed it.

Subprime Security and Credit Losses

Citigroup: $40.7bn
UBS: $38bn
Merrill Lynch: $31.7bn
HSBC: $15.6bn
Bank of America: $14.9bn
Morgan Stanley $12.6bn
Royal Bank of Scotland: $12bn
JP Morgan Chase: $9.7bn
Washington Mutual: $8.3bn
Deutsche Bank: $7.5bn
Wachovia: $7.3bn
Credit Agricole: $6.6bn
Credit Suisse: $6.3bn
Mizuho Financial $5.5bn
Bear Stearns: $3.2bn
Barclays: $3.2bn

Subprime Stories

MAY 2008

15 May

Barclays takes a further £1bn writedown on assets.

12 May

HSBC reveals a further $3.2bn of losses linked to the US sub-prime market.

APRIL 2008

22 April

The UK's second largest bank, RBS, reveals £5.9bn in writedowns from the credit crunch, and asks its shareholders for an additional £12bn to rebuild its capital base.

18 April

Citigroup reveals another $12bn in sub-prime losses, bringing its total to $40bn, the most of any bank. It cuts 9000 jobs amid a quarterly loss of $5bn, down from $9.8bn in the previous quarter.


US investment bank Merrill Lynch reveals an additional $4.5bn in credit writedowns and a loss of nearly $2bn in the first quarter of the year.

1 April

Swiss bank UBS reveals a further $19bn of asset writedowns. This came on top of the $18.4bn which it announced for 2007.

1 April

Germany's Deutsche Bank warns of credit losses of $3.9bn in the first three months of 2008.

Read the full story

MARCH 2008

31 March

US Treasury announces major package to reform regulation of US financial markets and prevent future financial crises. The plans are criticised by consumer groups but generally praised on Wall Street.

18 March

Wall Street investment banks Goldman Sachs and Lehman Brothers reveal that their first quarter profits have been halved by the credit crunch.

But stocks rise on the news that their results have not been as bad as expected.

17 March

Wall Street investment bank Bear Stearns is acquired by JPMorgan Chase for $240m, a fraction of its share price, in deal backed by $30bn in Fed loans.

The bank got into trouble over its huge exposure to sub-prime mortgage-backed securities.

14 March

Bear Stearns receives emergency funding, after its exposure to mortgage-backed investments undermined confidence in the bank.

14 March

Investment fund Carlyle Capital fails as the credit crisis spreads from sub-prime related products to other mortgage-backed investments.

11 March

Central banks make another coordinated attempt to ease conditions in the credit markets, by announcing $200bn of new emergency lending for banks.

7 March

The former bosses of Merrill Lynch and Citigroup are questioned by a Congressional panel over their bumper pay - despite huge, sub-prime related bosses at their banks.

6 March

A £1bn hedge fund run by Peloton Partners collapsed, after it struggled to meet interest payments due to the credit crisis.

5 March

France's biggest retail bank Credit Agricole announced a fourth quarter loss hit by a 3.3bn euro charge at its investment banking boss, Calyon.

3 March

HSBC announced a $17.2bn (£8.7bn) loss after the decline in the US housing market hit the value of its loans.

14 February

Commerzbank, Germany's second-biggest bank, cuts $1.1bn off the value of investments linked to the sub-prime mortgage crisis and warns its losses could worsen.

Swiss investment bank UBS confirms it has made a loss of $4bn in 2007 after cutting the value of investments by $18.4bn.

13 February

Britain's Bradford & Bingley cuts the value of its sub-prime mortgage-related investments by £144.4m ($284.5m). A few weeks earlier it had said it did not expect to suffer any write-downs.

Japan's financial watchdog says Japanese banks suffered losses of $5.6bn by the end of 2007. These have more than doubled in the last three months of the year.

12 February

Swiss bank Credit Suisse says losses on sub-prime investments were $1.8bn, less than originally expected.

10 February

Leaders from the G7 group of industrialised nations say worldwide losses from the US mortgage crisis could reach $400bn.

8 February

Deutsche Bank announces $3.2bn of sub-prime write-downs in the third quarter of the financial year and predicts there is not much more to come.

7 February

US Federal Reserve boss Ben Bernanke expresses concern about bond insurers that guarantee against defaults on mortgage loans.

6 February

Wall Street sees its worst share losses in almost a year, amid fears that the worst US housing slump in 25 years is crippling the wider economy.

5 February

US financial firm GMAC, which owns sub-prime lender Residential Capital, says it has made a $2.3bn loss in 2007, compared with a $2.1bn profit the year before.


31 January

Bond insurer MBIA announces a $2.3bn loss, its biggest yet for a three-month period. It was hit by declines in the value of US mortgage-backed debt, which it guarantees against.

30 January

The US Federal Reserve cuts interest rates to 3% from 3.5%. It is the second cut in nine days. US economic growth slows.

29 January

The US Federal Bureau of Investigation launches an investigation into 14 companies involved in the sub-prime mortgage crisis.

Pub chain owner Mitchells & Butlers loses £274m when a property deal falls through due to the credit crisis.

28 January

Belgian bank Fortis warns its losses connected to bad US mortgage debt could be as high as $1.47bn.

25 January

Barclays Capital predicts banks will need to raise as much as $143bn to weather the credit crisis.

23 January

The Bank of China dismisses rumours it was about to unveil massive losses caused by its exposure to the US sub-prime mortgage market.

22 January

The US Federal Reserve cuts interest rates by half a percentage point to 3.5%, it's biggest cut in 25 years.

21 January

Global stock markets, including London's FTSE 100 index, suffer their biggest falls since 11 September 2001.

21 January

German Bank WestLB warns investors that it expects to write down $1.45bn of investments and make a net loss of a similar amount.

18 January

Scottish Equitable introduces delays for investors wanting to withdraw money from its commercial property funds, citing recession and sub-prime worries.

17 January

Merrill Lynch unveils a $14.1bn write-down of investments linked to sub-prime mortgages and posts a net loss of $7.8bn in 2007.

Investment bank Lehman Brothers cuts 1,300 jobs as it scales back its US mortgage lending business.

16 January

US bank JP Morgan Chase says it has cut the value of its mortgage-related investments by $1.3bn. Profits for the last three months of 2007 fall by a third.

15 January
Citigroup, the largest bank in the US, reports a $9.8bn loss for the fourth quarter and writes down $18bn in sub-prime losses. It also announces further investments in the group by Kuwait and Saudi Arabia.

UBS has said that the crisis had cost it about $13.5bn in total
11 January

Swiss investment bank UBS warns that is still does not know the scale of its total losses from the sub-prime crisis and says it might make a loss in 2007 when it reports its full results.

Federal Reserve boss Ben Bernanke says that the outlook for the US economy is deteriorating among continuing worries about the sub-prime crisis.

The largest mortgage lender in the US, Countrywide, which pioneered sub-prime mortgages, is bought by Bank of America for $4bn after its shares plunge 48%.

9 January

Bear Stearns boss James Cayne steps down after the firm reveals $1.9bn in sub-prime losses, the largest in its history.

World Bank says that world economic growth will slow in 2008 due to credit crunch, but strong performance in China and India will cushion impact.

7 January

President George W Bush admits that the credit crunch could slow the US economy in 2008, but says it is still fundamentally strong.

US economists urge government action to ease looming US economic slowdown as a result of credit crunch.

4 January

US unemployment rises sharply as job report sparks fall in stock market

19 December

Morgan Stanley writes off $9.4bn in sub-prime losses and sells a 9.9% stake in the company to the Chinese state investment company CIC for $5bn to rebuild its capital.

18 December

The US Federal Reserve Bank tightens rules on sub-prime lending, requiring mortgage companies to check more carefully on customers' income and give full disclosure of the cost of the loan.

ECB lends European commercial banks $500bn over the Christmas period to help ease the credit crisis.

Bank of England makes £10bn available to UK banks to ease credit crunch.

17 December

US central bank, the Federal Reserve, makes $20bn available to commercial banks at auction to help ease the credit crunch.

Former Fed chairman Alan Greenspan urges the US government to give direct aid to homeowners hit by the sub-prime crisis.

14 December

Citigroup takes $49bn worth of sub-prime debts back on its balance sheets, effectively closing seven structured investment vehicles (SIVs) which had relied on money market funding.

13 December

World central banks agree coordinated action to inject at least $100bn into short-term inter-bank credit markets to restore confidence.

11 December

US central bank, the Federal Reserve, cuts interest rates for a third time to 4.25% to ease the credit crunch.

10 December

Swiss bank UBS reports a further $10bn write-down caused by bad debts in the US housing market.

Lloyds TSB reveals that bad debt linked to the US sub-prime mortgage crisis will cost it £200m.

6 December

President George W Bush outlines plans to protect more than a million homeowners hit by the US housing slump.

Royal Bank of Scotland warns it will write off about £1.25bn because of exposure to the US sub-prime market.

The Bank of England cuts UK interest rates for the first time since 2005, amid signs that the economy is slowing.

The European Central Bank keeps interest rates in the eurozone at their current level of 4%.

4 December

US mortgage giant Fannie Mae is to issue $7bn of shares to cover losses linked to the housing market.

Canada cuts interest rates for the first time since April 2004 amid credit fears.

The future of the UK mortgage industry remains bright, despite the current funding crisis, say lenders.

UK mortgage lenders should prepare for the global credit crunch to get much worse, the City watchdog says.

3 December

Credit agency Moody's widens its debt review, having already earmarked $116bn of debt for downgrading.

November 2007
30 November

US construction spending falls sharply, led by a large fall in the building of private homes.

Morgan Stanley co-president Zoe Cruz is to retire, seen as the latest casualty of the US sub-prime crisis.

27 November

US mortgage guarantor Freddie Mac is selling $6bn of shares to cover further bad debt losses.

Citigroup agrees to sell shares worth $7.5bn to an investment fund owned by Abu Dhabi.

22 November

UK lender Kensington Mortgages withdraws its entire range of sub-prime mortgages because of market conditions.

The Nationwide, the UK's largest building society, benefits from being seen as a haven from troubled banks.

20 November

US mortgage guarantor Freddie Mac sets aside $1.2bn to cover bad loans and reports a $2bn loss.

UK buy-to-let mortgage lender Paragon sees its shares fall nearly 40% after revealing funding difficulties.

19 November

Northern Rock says bids to buy bank are "below current market value."

Swiss Re expects to lose $1bn on insurance a client took out against any fall in the value of its mortgage debt.

16 November

Goldman Sachs forecasts sub-prime losses for entire financial sector at $400bn (£200bn).

Northern Rock's boss resigns

15 November

Barclays says it had written down £1.3bn ($2.6bn) in sub-prime losses.

US House of Representatives passes Predatory Lending and Mortgage Protection Act by lopsided majority.

14 November

HSBC raised its sub-prime bad debt provision by $1.4bn (£670m) to $3.4bn.

Mizuho, Japan's second largest banking group, saw a 17% drop in first-half net profits and cut its full-year operating profit forecast by 13%, largely as a result of sub-prime-related losses at its securities arm.

13 November

Bank of America writes off $3bn in sub-prime losses.

12 November

The three biggest US banking groups - Citigroup, Bank of America and JPMorganChase - agree a $75bn superfund to restore confidence to credit markets.

9 November

US's fourth largest lender Wachovia revealed a $1.1bn loss due to decline in value of its mortgage debt plus $600m to cover loan losses (total $1.7bn, £829m).

8 November

Morgan Stanley unveiled a $3.7bn loss from its US sub-prime mortgage exposure.

BNP Paribas (after temporarily freezing hedge funds with $2.1bn in assets under management in August) revealed it had written down 301m euro ($439m, £214m) because of credit problems, including $197m related to US sub-prime and home builder lending.

5 November

Banking giant Citigroup announces fresh losses of between $8bn and $11bn because of exposure to the US sub-prime market. Chief executive and chairman Charles Prince resigns.

1 November

Credit Suisse revealed a $1bn write-down on bad debts.

October 2007
31 October

Federal Reserve delivers second rate cut to boost markets

Deutsche Bank revealed a 2.16bn euros ($3bn, £1.6bn) write-down on bad debts.

30 October

Merrill Lynch takes a $7.9bn hit following exposure to bad debt. Its chief executive, Stan O'Neal, resigns.

16 October

Northern Rock executives defend role at Treasury Select Committee

15 October

Citigroup writes down additional $5.9bn on exposure to the US sub-prime market.

Japanese bank Nomura announced the closure of its US mortgage-backed securities business and takes a $621m (£299m) hit.

14 October

US banks holding secret talks at US Treasury float idea of a new super-fund to revive the frozen credit markets.

5 October

Investment bank Merrill Lynch reveals $5.6bn sub-prime loss

1 October

Swiss bank UBS revealed losses of $3.4bn in its fixed income and rates division, and in its mortgage-backed securities business, while Citigroup admits $.31bn in losses.

September 2007
26 September

Commercial banks shun Bank of England rescue fund

22 September

UK Chancellor Alistair Darling suggests government will consider boosting deposit savings guarantee to £100,000.

20 September

Deutsche Bank boss Josef Ackermann warns of losses from sub-prime exposure.

Goldman Sachs makes a profit by betting that mortgage-backed securities will fall despite $1.5bn exposure.

18 September

The US Federal Reserve cuts interest rates to 4.75% from 5.25% to try to energise financial markets.

Savers return to Northern Rock after the government guarantees all savings.

15 September

Thousands of depositors queue outside Northern Rock branches to try and get their money out.

14 September

Shares in Northern Rock plummet after news of its Bank of England rescue is announced.

13 September

The BBC revealed that Northern Rock had asked for and been granted emergency financial support from the Bank of England, in the latter's role as lender of last resort.

11 September

ECB president Jean-Claude Trichet blames rating agencies for sub-prime crisis but says EU economy sound.

US Treasury Secretary Hank Paulson says mortgage lenders are to blame for sub-prime crisis.

6 September

ECB injects fresh cash into markets as credit fears intensify. Total intervention has now reached 250bn euros ($300bn, £150bn).

4 September

Bank of China reveals $9bn in sub-prime losses but Chinese government says its foreign exchange reserves will not be affected.

Overnight bank lending dries up as banks fear defaults from each other

3 September

German regional lender IKB recorded a $1bn loss as a result of exposure to the US sub-prime market.

August 2007
31 August

President Bush, flanked by Treasury Secretary Hank Paulson and Fed chief Ben Bernanke, pledges to ease sub-prime lending crisis.

30 August

German Chancellor Angela Merkel criticised credit ratings agencies for not spotting problems on the market.

28 August

The German regional bank Sachsen Landesbank is rapidly sold to Germany's biggest regional bank, Landesbank Baden-Wuerttemberg. It came close to collapsing under its exposure to sub-prime debt. It received a 17bn euro lifeline.

23 August

Leading sub-prime lender Countrywide gets $2bn cash injection from Bank of America.

Shares slump after Countrywide warns that mortgage slump is getting worse.

Leading US and European banks borrow $2bn from Federal Reserve

21 August

Sharp rise in US home repossessions as sub-prime borrowers default.

Capital One cuts jobs as sub-prime crisis bites.

20 August
Countrywide cuts jobs as sub-prime crisis hits.

US mortgage lender sells assets

UK sub-prime lenders tighten up lending terms.

17 August

The US Federal Reserve cut the interest rate at which it lends to banks (the discount rate) by half a percentage point to help banks deal with credit problems.

BNP Paribas says sub-prime losses in hedge funds will not impact on quarterly profits.

16 August

Countrywide draws on its entire $11.5bn credit line as liquidity crisis looms. Australian mortgage lender Rams also admits liquidity problems.

15 August

Shares plunge in largest mortgage lender Countrywide on fears it will go bankrupt

13 August

Wall Street giant Goldman Sachs said it would pump $3bn into a hedge fund hit by the credit crunch to help shore up its value.

The European Central Bank pumps 47.7bn euros into the money markets, its third cash injection in as many working days. Central banks in the US and Japan also topped up earlier injections.

10 August

Global stock markets stayed under intense pressure over sub-prime fears. London's FTSE 100 index had its worst day in more than four years, closing 3.7% lower.

The ECB provided an extra 61bn euros of funds for banks. The US Fed said it would provide as much overnight money as would be needed to combat the credit crunch.

9 August

Short-term credit markets freeze up after French bank BNP Paribas suspends three investment funds worth 2bn euros, citing problems in the US sub-prime mortgage sector. BNP said it could not value the assets in the fund, because the market had disappeared. The European Central Bank pumps 95bn euros into the eurozone banking system to ease the sub-prime credit crunch. The US Federal Reserve and the Bank of Japan take similar steps

6 August

American Home Mortgage, one of the largest US independent home loan providers, filed for bankruptcy after laying off the majority of its staff. The company said it was a victim of the slump in the US housing market that had caught out many sub-prime borrowers and lenders.

3 August

Shares fall heavily on fears of sub-prime losses and global credit crunch.


July 2007
31 July

Bear Stearns stopped clients from withdrawing cash from a third fund, saying it has been overwhelmed by redemption requests. The lender also filed for bankruptcy protection for the two funds it had to bail out earlier.

27 July

Worries about the sub-prime crisis hammered global stock markets and the main US Dow Jones stock index slipped.

26 July

Bear Stearns seized assets from one of its problem-hit hedge funds as it tried to stem losses. Shares fell 4.2% in five sessions, its worst weekly decline in almost five years.

24 July

Rising defaults on sub-prime loans hit profits at Countrywide, largest mortgage lender.

20 July

Federal Reserve chairman Ben Bernanke warned that the crisis in the US sub-prime lending market could cost up to $100bn.

19 July

Fed comments shake global shares

18 July

Bear Stearns told investors that they will get little, if any, money back from the two hedge funds that the lender was forced to rescue.

13 July

US industrial firm General Electric decided to sell the WMC Mortgage sub-prime lending business that it had bought in 2004. "The mortgage industry has greatly changed since the purchase of WMC," said its chief executive, Laurent Bossard.

10 July

Independent market analyst Datamonitor said UK sub-prime mortgages were set to grow faster than mainstream mortgages, with the market worth some £31.5bn by 2011.

4 July

The UK's Financial Services Authority (FSA) said it would take action against five brokers selling sub-prime mortgages, claiming they offered loans to people who should not be given them.

June 2007
29 June

Bear Stearns fires its head of asset management and hires Jeffrey Lane find out what went wrong at its hedge funds.

22 June

Bear Stearns revealed it had spent $3.2bn (£1.5bn) bailing out two of its funds exposed to the sub-prime market. The bailout of the fund was the largest by a bank in almost a decade.

14 June

Senior US legislator Barney Frank says Fed could lose its authority to regulate mortgage business.

May 2007
30 May

UK sub-prime lender Kensington agrees takeover

3 May

GM finance unit loses heavily on sub-prime mortgages

UBS closes its US sub-prime lending arm, Dillon Read Capital Management.

April 2007
17 April

US government-backed lenders try to tackle sub-prime crisis

2 April

US home sales fall sharply

New Century Financial filed for Chapter 11 bankruptcy protection after it was forced by its backers to repurchase billions of dollars worth of bad loans. The company said it would have to cut 3,200 jobs, more than half of its workforce, as a result of the move.

March 2007
16 March

US-based sub-prime firm Accredited Home Lenders Holding said it would sell $2.7bn of its sub-prime loan book - at a heavy discount - in order to generate some cash for its business.

13 March

Wall Street hit by sub-prime fears

12 March

Shares in New Century Financial, one of the biggest sub-prime lenders in the US, were suspended amid fears it might be heading for bankruptcy.

8 March

Biggest US house builder DR Horton warns of huge losses from sub-prime fall-out.

February 2007
22 February

HSBC fires head of its US mortgage lending business as losses reach $10.5bn.