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Banking Towards a New Millenium Table of Contents Chapter 1: The Historical Background .............................................................................................. Introduction ........................................................................................................................ US Historical Background ................................................................................................. European Historical Background ....................................................................................... Japanese Historical Background ........................................................................................ 1 1 3 6 9 Chapter 2: The Global, Political and Economic Outlook ............................................................... 11 World Overview ............................................................................................................... 11 Aiming for stability in Europe ..................................................................................... 12 The Prospects for Equity Capital ..................................................................................... 14 A new numeraire? .................................................................................................. 16 Chapter 3: The Structure and Regulation of the Banking System ................................................ 19 Introduction ...................................................................................................................... 19 Increasing diversity ...................................................................................................... 19 The return of regulation ............................................................................................... 20 The US: A Banking Framework for the Future ................................................................ 23 Brady, McFadden and Glass-Steagall .......................................................................... 23 Facing up to market forces ........................................................................................... 24 Special-purpose lending units ...................................................................................... 25 The money-centres in decline ...................................................................................... 26 Europe: A Banking Framework for the Future ................................................................ 27 State control and the single banking market ................................................................ 28 Japan: A Banking Framework for the Future .....................................................................29 The universalists' argument ...........................................................................................31 The BIS "threat" ........................................................................................................... 32 The corporate view ........................................................................................................34 Chapter 4: Banking Strategies for the 1990s .....................................................................................37 Key Influences ....................................................................................................................37 Controlling risk............................................................................................................. 37 The wholesale and retail divide.................................................................................... 39 The Challenge for US Banks .................................................................................................. 40 Do your best, drop the rest ........................................................................................... 40 The economic challenge ............................................................................................... 42 Finding new markets ..................................................................................................... 43 What the Europeans Are Planning...................................................................................... 43 "Shopfront" branches..................................................................................................... 44 Bancassurance will spread .......................................................................................... 45 Japan's Way Forward ......................................................................................................... 47 A period of soul-searching ............................................................................................ 47 No more easy money......................................................................................................48 The banking view .......................................................................................................... 50 Chapter 5: Analysis of the Questionnaire Survey ........................................................................... 55 Statistical Tables .................................................................................................................................. 61 Table 1: Current status of respondents' organisation .......................................................................... 63 Table 2: Identity of respondent ............................................................................................................. 63 Table 3: The forces of change in financial institutions ....................................................................... 64 Table 4: How financial institutions plan to grow ................................................................................. 65 Table 5: Is the strategy of Allfinanz or bancassurance likely to lead to success? ............................. 65 Table 6: Who oversees whom ............................................................................................................... 66 Table 7: Does the current regulatory structure have adequate authority? .......................................... 66 Table 8: If current regulation is too onerous, where should the system be cut back? ........................ 67 Table 9: If existing rules are insufficient, where should these be strengthened? ................................67 Table 10: Do you expect a European central bank? ............................................................................. 68 Table 11: Are any central banks or regulatory authorities giving unfair advantage to their institutions? ................................................................. 68 Table 12: Which region of the globe will prove most fruitful? .......................................................... 69 Table 13: Which region will prove riskiest as a credit? ...................................................................... 69 Table 14: Where will you raise capital for your institution's growth? ................................................ 70 Table 15: Who does your planning? ..................................................................................................... 71 Table 16: Will percentage of annual spending on technology increase? ............................................ 71 Table 17: Will you consolidate credit exposure to a customer/group in real time? ............................ 71 Table 18: Are you satisfied with your credit--risk process, rather than that related to assessing specific risk? ......................................................... 72 Table 19: Do you consolidate global information for trading risk? ................................................... 72 Table 20: Do you consolidate global information for trading risk in real time? ................................. 73 Table 21: Do you calculate total profit or contribution for each customer/group? ............................ 73 Table 22: Sources of funding ................................................................................................................ 74 Case Studies ABN Amro: merging for the global market ................................................................................77 Banca Internazionale Lombarda: a new niche bank for new markets .................................. 80 Banc One: acquisitions and marketing build a super-regional ................................................. 83 Banco Popular Espanol: a conservative, profitable, regional consumer bank ........................ 88 BankAmerica: preparing for nationwide banking ..................................................................... 92 Bankers Trust: a global trading and technology leader ........................................................... 96 Banque Nationale de Paris: leading-edge electronic banking .............................................. 100 Chartered WestLB: creating a pan-European merchant bank .............................................. 104 Chemical Banking Corporation: a money-centre bank with regional reach ....................... 107 European Savings Banks: helping to shape the single market's financial system . . . ......... 112 General Electric Capital Corporation: a stiff challenger to traditional banking ................ 115 Hambros: combining retail and traditional merchant banking ............................................... 121 Industrial Bank of Japan: aiming to be the best for corporations worldwide ..................... 125 Kyowa Saitama Bank: looking for growth in retail banking ................................................. 130 Marks and Spencer: a non-bank bank leader in Europe ........................................................... 132 J P Morgan: a model for international corporate banking ..................................................... 136 National Westminster Bank: making operating systems pay ............................................... 141 Nikko Securities: using new investment techniques to expand ............................................. 143 Sakura Bank: merging to become universal and more profitable ......................................... 147 State Street Bank Corporation: high-tech global custody and asset-management . . ......... 150 Sumitomo Bank: covering every client's needs 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