Understanding the bad bank

For many, this is the best exit from the financial crisis—but the choices entailed are not straightforward.

DECEMBER 2009 • Gabriel Brenna, Thomas Poppensieker, and Sebastian Schneider

Source: Corporate Finance Practice

“Bad banks” are back. The concept is simple. The bank divides its assets into two categories. Into the bad pile go the illiquid and risky securities that are the bane of the banking system, along with other troubled assets such as nonperforming loans. For good measure, the bank can toss in non-strategic assets from businesses it wants to exit, or assets it simply no longer wants to own as it seeks to lessen risk and deleverage the balance sheet. What are left are the good assets that represent the ongoing business of the core bank.

By segregating the two, the bank keeps the bad assets from contaminating the good. So long as the two are mixed, investors and counterparties are uncertain about the bank’s financial health and performance, impairing its ability to borrow, lend, trade, and raise capital. The bad-bank concept has been used with great success in the past and has today become a valuable solution for banks seeking shelter from the financial crisis.

But while the idea is simple, the practice is quite complicated. There are many organizational, structural, and financial trade-offs to consider. The effect of these choices on the bank’s liquidity, balance sheet, and profits can be difficult to predict, especially in the current crisis. Capital and funding markets are still fragile in many regions, and many asset classes have been severely affected.

In This Article

Exhibit 1: Short-term funding spreads are slowly returning to pre-crisis levels.

Exhibit 2: These variables help determine the bad bank’s structure and operations.

Exhibit 3: The bank’s model is primarily determined by choosing whether to keep assets on the balance sheet.

Exhibit 4: Choosing the right portfolio strategy can yield 1 percent to 2 percent of additional value.

Exhibit 5: It is essential to be clear on the unit’s goals with respect to liquidity, collateral, and gross risk reduction.

Making game theory work for managers
A new model, rejecting solutions optimal only for a single precisely defined future, generates answers representing the best compromise between risks and opportunities in all likely futures.
DECEMBER 2009 • Hagen Lindstädt and Jürgen Müller

Source: Strategy Practice

Our work on European passenger rail deregulation and other business issues shows that game theory can provide timely guidance to managers as they tackle difficult and, sometimes, unprecedented situations. The key is to use the discipline to develop a range of outcomes based on decisions by reasonable actors and to present the advantages and disadvantages of each option. Our model shifts game theory from a tool that generates a specific answer to a technique for giving informed support to managerial decisions.

Several factors in today’s economic environment should propel game theory to a prominent place in corporate strategy. The global downturn and uncertain recovery, of course, have prompted radical shifts in demand, industrial capacity, and market prices. Some companies, emboldened by the crisis, have tried to steal market share. New global competitors from emerging economies, particularly China and India, are disturbing the established industrial order. They use new technologies and business models and even have novel corporate objectives, often with longer-term horizons for achieving success.

 
In This Article
Exhibit 1: Three scenarios depict the interrelatedness of customer demand, the incumbent’s cost disadvantage, and the strength of network effects.

Exhibit 2: The competitive scenarios change slightly if the passengers are highly price sensitive. ..In times of uncertainty, game theory should come to the forefront as a strategic tool, for it offers perspectives on how players might act under various circumstances, as well as other kinds of valuable information for making decisions. Yet many managers are wary of game theory, suspecting that it’s more theoretical than practical. When they do employ this discipline, it’s often misused to provide a single, overly precise answer to complex problems.

To power the solar planes expected in China air spaces, ACJC spins off Kawasaki Solar in Southern China and plans the first heavy industry unit in northern part of HKSAR and will integrate with China solar systems companies in Shenzhen. 

Kawasaki Solar will invent her own solar vehicles and be branded as “eHelicopter.com”.  The product design will be targeted to complete by 2012 Spring (within next 28 months). 

The Quarterly: You call that active inertia.
Don Sull: Active inertia—that’s my little trademarked phrase, yes. Another thing you can
do wrong is try to plan your way out of it. There are basically three broad approaches to
dealing with turbulence, and one of them is anticipation. You think, “If I just look through
the telescope, squint hard enough, look long enough, I’ll be able to see through this foggy
future. I’ll be able to predict what’s going to happen. I’ll know what to do.” That’s just not
going to happen. The record of people’s predictions in business, or in any domain, is very,
very poor. And as turbulence increases, the effectiveness of that approach decreases.
So I think trying to plan your way or think your way out of it is a real problem. I think
another one is just doing what everybody else is doing, because a lot of firms panic when
there’s turbulence or they sink into a defensive crouch and just try to minimize damage.
And if you’re looking around at the companies that are making inappropriate responses
and then copying them, it’s unlikely that you’re going to have a better outcome than they
do.
The Quarterly: So what’s the right way to respond? Where is the upside in turbulence,
and how do you grab it?
Don Sull: The upside is that turbulent markets are creating opportunities all the time.
They’re throwing new resources into the market. If you look at the rise of Mittal Steel,1
for instance, rapidly dwarfing a lot of the traditional steel players—they didn’t go around
avoiding turbulence, they went after the most turbulent markets in the world—Kazakhstan
and Indonesia and so forth—to see the opportunities there.
So [turbulence] throws out new resources. It shifts consumer demands. If you look now
in the current downturn, a lot of consumers have a lot less disposable income. You could
say, “That’s awful. For fast-moving consumer good companies, that’s bad news.” Well it is,
although some of the more nimble companies like Nestlé and Starbucks and McDonalds
are responding to those shifting consumer demands. McDonalds in Europe is opening its
McCafes and rolling them out quite aggressively, Starbucks has their instant coffee, and
Unilever has taken some products they’ve pioneered in emerging markets and brought
them into Europe. So [the fact that] consumer preference is shifting isn’t necessarily bad
news. It creates new customer pain and agile companies can meet those needs and create value.

Words from CEO> Throwing new resources into new markets is the key strategy for growth.  We are hiring a Portugese consultant – John to construct a new formula of coffee (combining Brazil and Africa coffees with a new taste for HKSAR locally) and plans the new coffee chain in the “The Centre” at the heart of HKSAR CBD. 

The coffee chain will be branded as “Emily33″ and co-worked with key speed dating operators namely (1) www.hkspeeddate.com (2) Coffee Matching (3) 214 matching.  The branded coffee “Emily33″ will be exported to PRC China in a penetrating pricing at RMB 3.3 and will be expanded with a franchising system with setup fee of RMB 330,000 plus annual management fee of RMB 33,000.  Each outlet will be equiped with Wi-Fi network free of charge and managed by English/Japanese/Korean speaking staff with hotel management background. 

The strategy links with the PRC national policy of increasing domestic consumption and shifting consumer demands for western products with relevant packaging (in a culturally appealing manner).  Of course, another chain for wine distribution will be planned for HKSAR only, not for PRC due to sensativity of the indusrtry as well as the complications in dealing with PRC administration.  The first bar of this type will be articulated with a World Class DJ such as Mr. Jordan Robert Laws plus advanced audio output system (www.AudioBaseHK.com).  The dancing floor will be operated by Filipino and Nepal staff (also security office).  Touch screen system by EBSPOS for accounting and billing. 

Pricing strategy:

1/ event based pricing for reputable organization: bar guarantee HKD150,000 for 300 persons for (1) DJ (2) Audio/Lighting systems (3) security officers for the whole premises (4) F&B – international cruises (5) transportations to key locations of HKSAR (from 5am to 6am) (6) operating hours (from 10pm to 5am)

Location strategy:

1/ ICC or other premises (about 6000 s.f).- next to high speed West Rail (targeting at 9+2 Greater PRD customers) – by 2011

2/ Nina Tower or other premises (about 9000 s.f) - next to Tusen Wan West Rail (targeting at NT West customers) – by 2012

3/ Landmark North or other premises (about 20,000 s.f) – next to Sheung Shui East Rail (targeting at NT North customers) – by 2013

Welcome your comments, please email to us at Tony@AnyChinaJob.com

New version of Google Mobile App for iPhone in the App Store

Kawasaki – Hong Kong Tech Exchange: Asia Intellectual Property and Technology Forum in Hong Kong

3 December, 2009 (Thursday) 02:30 PM – 04:30 PM
Venue: Seminar Room A
Speaker(s):
  Mr. Takao Abe
Mayor of Kawasaki City
 
  Dr. Toshiya Watanabe
Professor of Research Centre for Advanced Science and Technology, the University of Tokyo
 
  Miss Caroline Chow
Senior Solicitor (Registration), Intellectual Property Department, HKSARG
 
  Mr. Daniel Cheng
Managing Director, Dunwell Group
Chairman, Hong Kong Environment Industry Association
 
  Mr. Kenny Wong
Principal Consultant, Hong Kong Productivity Council
 
  Mr.Yasutsugu Ogura
Member of the Board and Senior Vice President, JFE Engineering
 
 
Description:
Through the application of innovation and technology, enterprises can enhance their business development effectiveness and enrich their products and services purchase value. Innovation and technology help every business to move up its value chain; those creative elements can reinforce the new products, services, processes and systems, which makes the outcome can fit into consumers’ needs even more perfectly.
Intellectual Property promotes innovative technology, gear up commercialization process for advance technology. It acts an important role to strengthen the economical competitive power.

In Inno Tech Design 2009, HKTDC has invited Kawasaki City and 14 innovative technology enterprises to take part in the event.

Make a good use of Kawasaki’s expertise on eco-tech, to drive communication exchange between Asian and the worldwide
Strategic plan for integration of technology and Intellectual Property: Coordinate with professional training, to exploit new international markets
When local enterprises face international advanced technologies, what is their biggest challenge and solution?
To share successful stories and will make a more in depth discussion on Intellectual Property
 
 

Other examples:

■Power Plant Kawasaki Plant Systems, Ltd. supply various types of power plants, such as combined cycle power plants, conventional fossil fuel fired power plants, various other fuel including biomass fired power plants, and various waste heat recovery type power plant. We can contribute to customer’s needs by achieving more efficient energy utilization and providing them with the optimum power generation and heat supply systems. (Power Plant Product Line) Combined Cycle Power Plant Products Cement Waste Heat Power Plant Products Conventional Fossil Fuel Fired Power Plant Products

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原文來自 http://hk.myblog.yahoo.com/sgtsugar@ymail.com/article?mid=19