Country Risk Part.I

The Mexican debt crisis in 1982 which forced the country to introduce a moratorium is one of the first and most contemporary manifestations of country risk. The concept also takes full extent over the 90 years with the crisis countries. Emerging from 1997 Asian crisis, Russian crisis in 1998 etc. Indeed, given the globalization of the economy and the succession of crises due to the expansion of capital movements in the world, economic agents and financial choices for their particular investment and acquisitions, need accurate information on the assessment of risk profiles of the countries covered.

A single definition of country risk is difficult to provide to the extent that it is a composite concept. Country risk encompasses all actual future events that may affect a financial investor in the conduct of its operations in relation to a country called "at risk". The risks mentioned are related to the state of the country, regardless of the quality of the debtor or the project.

However, if the concept is difficult to define exhaustively, his analysis is far from insurmountable. Many tools and procedures are available for players to understand this risk.

First, the concept of country risk and sovereign risk are often confused. Sovereign risk is the risk for financial institutions to see the sovereign (central government, ministries, local governments and regional ...) which they have granted loans, unwilling or unable to meet its payment obligations to them. Country risk in turn has a much broader scope because there is no concept of "sovereign", the entity in question is the entire country. The two concepts are nevertheless closely related. Indeed, as part of a scoring, note the Sovereign cannot be too far from the rating of the country, the quality of the first depends on the country's environment and the decisions of the Supreme rarely without consequence on the functioning economy.

China raising up ...

China is emerging as both leading markets and rising economic power, and meeting with impressive rates of double-digit growth for several years. China's financial sector also benefits from good economic policy. countries, also following the path of openness and market liberalization in accordance with agreements signed by China to the WTO in January 2001 emerging well.

Historically, between the restructuring of agriculture, industry and the banking sector, the government, in the early 1980 gives priority to primary and secondary sectors to the detriment of the banking sector which will bear the cost of the transition economy. This position has resulted in delaying the development of banks in China and weighed on the accounts of the major institutions with bad debt rates sometimes exceeding 40%. Faced with the need for modernization of the Chinese banking, the government changed tack and have signed the WTO agreement to liberalize the banking market in 2001.
Since then, many international banks, anxious to find alternatives to growing their domestic market less dynamic, investing heavily in emerging countries and primarily in the "Middle Kingdom" which presents serious advantages …

Since January 2007, the news is full of examples of foreign investment through equity, joint ventures or acquisitions in the Chinese banks. We made especially Citigroup, which won the "Guangdong Development Bank" in front of the SG, Bank Of China 10% owned by RBS or the Construction Bank of China 9.1% owned by Bank Of America. Overall, although the role of foreign banks is negligible - they represent less than 2% of Chinese assets - their position continues to grow.

Chinese and foreigners have much to gain from the recent opening of the market (2001). Indeed, the Chinese banking sector needs foreign players to upgrade the profession and make a transfer of skills; foreign players in turn reap the benefits of Chinese growth.

However, prudential Chinese are real barriers to entry for foreign banks: capitalization of at least 1bn Yuan, exposure to a single client must not exceed 10% stake in the subsidiary and the ratio of loans / deposits do not exceed 75%.

But the stakes are: market access abysmal savings of Chinese households is worth the investment for many banks and foreign insurers. Candidates rush to the office of the CBRC (China Banking Regulatory Commission) and the Chinese newspapers that tell of six banks, want to establish subsidiaries of Chinese law. Several big names such as HSBC, Citigroup, Deutsche Bank or JP Morgan have also applied. It's a safe bet that the list will grow as and regulatory developments and market opening...

New payment methods, to configure market Part.II

Deregulation also imposed with the SEPA will work no doubt for these new products, improving competition and market dynamics. However Europe's payments, particularly heterogeneous, certainly will offer a unique business model and transposed from one country to another.

The payments market is evolving towards a model driven "co-distribution". For credit institutions, historical market leaders, the challenge is to partner with as soon as new entrants, suppliers of innovative materials. This is not only to respond to the risk of decline in the volume of commissions received, but also to offer their business customers innovative and robust solutions, and this, as soon as possible to maintain their market share. The players in the consumer credit will also fit on their revolving credit card.

Sites are consistent adaptation to provide both a business perspective (definition of responsibilities, risk management, targeting policies and pricing ...) as a point of view of information systems (changing production tools and CRM, electronic banking trade flows with partners, upgrade repositories ...) The needs are also important to provide training in the branch networks, to spread the new methods of marketing and loyalty.

Finally, the area of payment being in a phase of great change, both in terms of regulation or in terms of new offerings / technologies, some players have an attitude rather than "defensive" (including banks ...) while others may adopt a logic "offensive" to take advantage of this window of opportunity to enter the market. In all cases, regardless of the type of actor, it's being played today that the reconfiguration of the market tomorrow.

New payment methods, to configure market Part.I

There are innovative ways of payments in the market. The payment of the future just around the corner: NFC mobile phones, TPE biometric or contactless cards etc. Given the diversity of solutions, potential entrants and business models possible,

In the United States and Great Britain, stores now offer the ability to adjust by putting his finger on a biometric TPE. This device allows in particular reducing the rate of commissions charged to merchants by offering an alternative to traditional electronic payment networks (MasterCard, Visa, Amex ...). A single operator manages all the activities: Registration and scanning fingerprints, food bases CRM containing biometric markers, center management authorizations and payment instructions via electronic checks.

Asia is basically the payment by mobile phone that has developed. These are the operators themselves who are behind this revolution, like NTT, Do Como - the first Japanese operator - which now has a banking license.

Other supports innovative payments, already launched or still in study, will also put in place: contactless payment card, bank transfer by SMS, prepaid bank cards, biometric payment online ...

In Europe, experience "laboratories" abound, but no business model seems to be finalized at this point. Bids still need to mature to provide an appropriate policy mix in terms of palatability and customer profitability, particularly in arbitrating on the following:

* Choice of media and associated technologies: NFC mobile phone (with card integrated or not with the SIM card), biometric POS, RFID card reading (with or without chip), USB drives to borrow for online payments ...
* Types of payments and services available: electronic wallet, bank account debit (backed or not network card), revolving credit line, transfer, various insurances ...
* Partners in the presence and role distribution business (distribution, retention, risk management, billing and collection ...): banks, telecom operators and MVNOs, biometrics specialists, retail signs, payment networks, card manufacturers and chips, cards and managers authorization centers ...

Carry Trade Part.III

This trend leads to a significant increase in financial markets, coupled with the disappearance of the concept of risk in the minds of market players due to a depletion of non cash flow. However, a decline of return on financial markets, a sudden reversal of the market, would result in substantial losses for investors, given the high level of leverage and risk now borne in the carry trade. Such a situation would cause a repositioning of investors followed by a rapid and concomitant unwinding of positions in many currencies.

The lower level of liquidity resulting from this movement would affect all markets and could be the detonator of a global currency crisis or a global economic crisis. The same situation was experienced in 1997-1998 in Asia while the yen carry trade operations had already been implemented and that the Russian market, object placement, had fallen sharply. Today the extent of yen carry trade is more important and the crisis would reach Europe and the United States, countries in which investments are made.

Against a backdrop of continued increase in U.S. and European markets, increasing the risk borne by financial transactions recently introduced, the Japanese monetary policy is closely watched by central banks. To prevent slippage of the financial markets, a gradual closing of the "tap" cash is needed and must go through a rate hike. However, the continued movement deflation in Japan does not motivate a significant rise in interest rates. Japan cannot afford to hire a genuine policy of monetary tightening; the Bank of Japan announced Feb. 21 an increase of 0.25% and should not go much further in the short term.

Several questions arise: what are today the real levers available to the Bank of Japan? Central banks have they any means to influence the global liquidity? Is it too late to avoid the worst?