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To: robnhood who wrote (14184)	7/7/1998 6:35:00 AM
From: Lalit Jain	Respond to of 116764

London & Frankfurt stock exchanges to merge ? Business UK and German exchanges in link-up The two exchanges plan a pan-European equity market The London and Franfurt stock exchanges have announced a strategic alliance aimed at developing a joint electronic trading platform. Deutsche B”rse chief executives Werner Seifert and the LSE's Gavin Casey said: "The goal of the alliance is to deliver a low-cost, efficient and accessible equity market infrastructure to enable issuers, investors and market participants to take full advantage of the opportunities arising from the development of a pan-European capital market." "Today, we start the process of harmonising the rules, conventions and technology for accessing the respective markets," they added. The project will start by combining the trading of leading German and UK stocks. The two exchanges intend to create the nucleus of a single European stock market which will ultimately be based on a common electronic trading platform. The participation of other exchanges will be welcomed and with their involvement it is expected that this will eventually lead to the formation of a pan-European market for some 300 blue chip stocks. The two exchanges have set up a project group providing a joint structure within which the necessary research, development, regulatory and systems convergence work will be carried out. A Project Board, established to steer the work, will consist of the two exchange Chief Executives, with Jurgen Blitz and Reto Francioni - both members of the Deutsche Borse Executive Board, and Allan Cameron and Martin Wheatley - members of the London Stock Exchange's Management Committee. During the preliminary project phase Gavin Casey will chair the Project Board. It is intended that a joint venture company, with equal equity shares, will be set up. Details of the management structure will be announced later. The project group will implement a phased programme to achieve the following: The first phase, to be completed in time for the introduction of the Euro (January 4 1999), will provide a common access package for both exchanges and a single point of liquidity on the relevant domestic exchange for UK and German blue chip companies currently traded on both markets. It is expected that significant progress can be made within the next 12 months in the harmonisation of market rules and conventions related to these large stocks. At a subsequent stage, the new company will create a single electronic trading platform and identify further opportunities for co-operation. The Chief Executives added: "With this alliance, which has the full support of the Boards of both Exchanges, we are beginning the process of creating a unified European equity market - accessible, cost-effective and efficient, benefiting all the users of our markets." news.bbc.co.uk

To: robnhood who wrote (14184)	7/7/1998 2:59:00 PM
From: Alex	Respond to of 116764

Scepticism over Japanese 'bridge bank' By Nick Beams 7 July 1998 The Japanese government has announced its plan for the restructure of the banking system but there is mounting scepticism in financial circles that it will do anything either to halt pressure on the yen in the short-term or restore financial health in the long-term. The plan was brought forward in the aftermath of the joint intervention by the US and Japanese central banks to halt the free fall of the yen on currency markets at the end of last month. After enjoying a slight recovery, the yen has started to come under pressure once again. Under the bank restructure plan, the government is to set up a so-called "bridge bank" to liquidate failed banks and financial institutions. The liquidation is to take place in two stages. First the failed bank will be placed under administration while a merger partner is sought. Corporate customers of the failed bank deemed to be creditworthy will be provided with access to loans. If no buyers emerge within a period of five years, the collapsed bank will be acquired by the government and the asset-backing of the bad loans liquidated. One of the reasons for financial-market scepticism is that the plan contains no provisions for dealing with the bad loans held by the supposedly healthy banks. The Tokyo Mitsubishi bank, for example, the largest bank in the world, has billions of dollars of bad loans on its books but nothing in the plan compels it to take any action. Financial analysts are insisting that the plan will only be considered to be working when real mergers and real banking failures take place, or, in the words of one commentator "blood has to start to flow". Comments from the US administration on the plan have echoed these sentiments. US Treasury Secretary Robert Rubin said the plan contained "potentially significant steps" but added that "what is important is for the Japanese authorities to move quickly to translate this approach into concrete actions." Speaking in Hong Kong at the end of his nine-day visit to China, US president Clinton said the markets were now "waiting for some action and a sense that if the implementation is not enough then more will be done." He warned that the measures to be undertaken "will be particularly unpopular and will take courage." The measures being demanded by the international money markets involve one of the largest asset and financial write-downs in world financial history. The total bad debts in the Japanese banking system are estimated to range between 77 trillion yen ($US600 billion) and 100 trillion yen. This means that the restructuring operation involves the elimination of a sum of capital equivalent to at least twice the gross domestic product of Australia. Elimination of bad debt on this scale will see the closure of banks, financial institutions and heavily indebted corporations as well as a rapid rise in bankruptcies and unemployment. When the country's 10th largest bank, the Hokkaido Bank, collapsed last November it set off a financial panic as depositors rushed to withdraw their savings. It is now a standing joke that while the Japanese economy continues to stagnate, sales of home safes are booming. The basic demand of the international financial markets is that the Japanese government ends the so-called "convoy" principle in the banking system under which the larger financial institutions, working under the supervision of the Ministry of Finance, have supplied credit to the smaller banks to ensure their solvency. There is nothing peculiarly "Japanese" about the operation of this mechanism - it is a classical example of the way in which national-based cartels have always worked to manage and protect their collective interests. It has only now started to unravel because of the stagnation in the economy. Since the collapse of the share and asset bubble in 1991, Japan has experienced growth rates of between 1 and 2 per cent. This has meant that bank profits have been so low that they have barely been able to cover new bad loans, let alone tackle the mountain of debts from the collapse of the bubble. Under these conditions, the continuation of the convoy system threatens to strangle economic growth as vast amounts of credit are used to prop up insolvent institutions. It is one of the chief reasons why the government's various expenditure packages have failed to stimulate the economy. Businesses find that when they seek loans from the banks there are no funds available, even though interest rates are at a record low. Whatever the immediate effect of the Japanese restructure plan on the money markets, the activity of international financial authorities is starting to resemble the fabled boy with his finger in the dyke as their attention turns from one trouble spot to another. The past two weeks have seen a rapid fall in the value of the Indian currency, a sharp drop in the Pakistani rupee and a fall in the value of the South African rand to record low levels. And the financial situation of Russia goes from bad to worse. The government has now called for the establishment of an international fund to stabilise the rouble. Since the Asian crisis began, authorities have already used up $14 billion of their foreign exchange reserves to try to maintain the link with the dollar. As of mid-June reserves were down to $15 billion, most of it borrowed. At the same time domestic interest rates are still around 80 percent after hitting 150 percent several weeks ago. In order to stabilise the situation the Russian government urgently needs an injection of cash - possibly as much as $20 billion. But the problem for international financial authorities is that no such funds are available. In an interview with the Sueddeutsche Zeitung newspaper last weekend, the managing director of the International Monetary Fund, Michel Camdessus, pointed to the dangerously low levels of the fund's reserves. He warned that without a boost from member states, the usable reserves would be between $10 and $15 billion, barely enough to deal with Russia let alone respond to other crises. "If we run out of money, this would worsen a very unstable global situation and mean a serious danger for the world economy," Camdessus said.