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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (6227)	9/7/1998 12:22:00 PM
From: Worswick	Read Replies (1) \| Respond to of 9980

For Private Use Only (C) The Financial Times LTCB: derivative deals at risk By Gillian Tett in Tokyo Investors holding derivatives contracts with Japanese financial institutions such as the troubled Long Term Credit Bank of Japan (LTCB) may not be fully protected under Japanese law if an institution collapses. The concern has arisen because Japanese law does not yet guarantee that the "netting" of counterparty derivative contracts will be respected if a bank or broker collapses. Netting is the process by which the different losses and profits between creditors are offset against each other and paid off in one lump sum. Japanese officials say the loophole will be plugged by legislation introduced as part of Big Bang financial deregulation designed to bring the country into line with global standards. But this legislation will not come into effect until December. The legal uncertainty is causing unease among some international investors because of mounting concern about the health of some Japanese financial institutions. The Financial Supervisory Agency (FSA), Japan's banking watchdog, says the gross notional volume of derivatives contracts held by Japanese banks totals Y2,090,000bn (œ9,000bn) - although the actual "netted" position of actual losses or profits would be far smaller. Most of these contracts are covered under an agreement forged by the International Swaps and Derivatives Association. Bankers believe that in the event of a collapse the Japanese courts would uphold any netting agreement. However, this is not stipulated under local law and there has been no precedent to date, they say. Yoshinobu Yamada, analyst at Merrill Lynch said: "The lack of a legal framework would make dealing with the derivatives problem complicated [in the case of a collapse]. This uncertainty undermines confidence." Christopher Well, a lawyer with White and Case, the US law firm, added: "There will be a collective sigh of relief in December when the lingering doubts are eliminated. But there are questions now about whether a trustee could reverse a netting agreement now." The issue of derivatives has become particularly controversial because parliament is debating LTCB's future. LTCB is in merger talks with Sumitomo Trust and the government is expected to inject at least Y500bn of public money to ensure the merger is consummated. The political opposition says public money should not be used to save LTCB but the ruling Liberal Democratic party insists that a collapse of LTCB would create a systemic risk because of its derivatives exposure. The degree of LTCB's derivatives risk is disputed. LTCB says it has reduced its exposure from Y51,500bn to Y40,000bn between March and July, and adds that most contracts are "plain, vanilla" contracts, such as swaps in the yen market. Some government officials conclude therefore that unwinding the contracts would be a relatively simple matter. However, the FSA has indicated that LTCB's exposure is nearer Y80,000bn and some bankers fear the exposure may contain complex structures which would be difficult to unwind. "It could lead to a very negative reaction in the markets," says one Bank of Japan official. Most western bankers believe the government will rescue LTCB but many have been re-examining their derivatives contracts with Japanese institutions. One lawyer with a US investment bank yesterday said: "We assume that the government would protect us in the last resort, since we are all in the same boat. But until December there will be an uncertainty, however small."

To: Worswick who wrote (6227)	9/7/1998 12:25:00 PM
From: Yogi - Paul	Respond to of 9980

Has democracy entered a bear market? nytimes.com For Personal use only-- September 7, 1998 Tensions Bring Gunfire in Cambodia -------------------------------------------------------------------------------- A.P. INDEXES: TOP STORIES \| NEWS \| SPORTS \| BUSINESS \| TECHNOLOGY \| ENTERTAINMENT -------------------------------------------------------------------------------- Filed at 11:36 a.m. EDT By The Associated Press PHNOM PENH, Cambodia (AP) -- Accusing political opponents of a grenade attack on his house, Cambodian strongman Hun Sen today ordered an end to protests against his rule and said his most ardent adversary would be arrested. Military police fired hundreds of shots into the air to disperse about 600 people gathered today outside a luxury hotel where politician Sam Rainsy, the main target of Hun Sen's crackdown, was taking refuge. One man was killed. Earlier, policemen guarding the hotel -- apparently to prevent Sam Rainsy's escape -- fired warning shots when diplomats from the embassies of Canada and Singapore drove away after meeting the opposition leader. No one was hurt and the cars departed without any damage. Authorities said two grenades were thrown from one or two passing motorcycles over the gates of Hun Sen's residence in the capital. No one was hurt and the only damage appeared to be a shattered window. Contrary to earlier reports, Hun Sen said no family members were home at the time of the attack early today. He seldom stays there, preferring his fortress-like compound outside the capital. In his public response to the attack, Hun Sen said there was ''already a request'' for the immediate arrest of Sam Rainsy, the chief leader of demonstrations against the government since disputed parliamentary elections July 26. Prince Norodom Ranariddh, whom Hun Sen deposed as co-prime minister in a bloody coup last year, also could be arrested, Hun Sen said. ''The arrests are to start from this hour,'' Hun Sen said. ''How many people will be arrested is up to prosecutors to decide. We urge the people who are to be arrested not to resist.'' The opposition claims that Hun Sen won the elections by fraud and has threatened to deny him the two-thirds majority he needs to form a new government. Sam Rainsy was with United Nations' officials today in a Phnom Penh hotel and his supporters were gathered outside when about 30 military police arrived and began scuffling with bystanders and later, shooting into the air. Through a spokesman, Sam Rainsy said he was under the protection of the United Nations, a claim that could not immediately be confirmed. Sam Rainsy's party said it had no information about the grenade attack, and said any arrest would violate an agreement with U.N. Secretary-General Kofi Annan that opposition leaders who fled after the coup could return to freely contest the elections. ''The regime is using every pretext it can find to justify the illegal and anti-democratic actions it seems to be preparing to take against the peaceful political opposition,'' Sam Rainsy's party said in a statement. Hun Sen gave another group of protesters outside the National Assembly until midnight to pack up their tents, mats and cooking gear and clear out. Police were out in force, but made no immediate move against the crowd. The grenade attack underscored the failure of three days of talks mediated by King Norodom Sihanouk, Ranariddh's father, aimed at brokering a settlement between Hun Sen's party and the opposition. Two weeks ago, a grenade was hurled at the National Election Commission headquarters, where Sam Rainsy was protesting alleged election fraud. One person died. In March 1997, four grenades were thrown into a protest led by Sam Rainsy near the National Assembly. At least 16 people were killed. The attack was widely blamed on Hun Sen, who denied responsibility. At a news conference today, Hun Sen denied speculation that he had staged the grenade attack to crack down on opponents.