Asian Bankers' Counsel
This poll is being carried out on an anonymous basis.
Analysis of the results will appear in the November 2007
edition of IFLR. No reference will be made to respondents'
names or firm names. No respondent bank will be referred to in
relation to specific answers.
The poll is intended for general counsel and transactional
lawyers in investment banking.
Follow-up interviews shall take place should you wish to
provide more detailed answers. These will be conducted by
telephone, also on an anonymous basis.
i. Structured products
1) What will be the next generation of structured products
More, in emerging markets
Equity and credit-linked retail structured products
Hybrid, multi-asset structured products, offering
cross-asset class exposure
Highly structured hybrid loans with limited
2) Do you see Asia as an innovator in this respect or simply
following products and trends in Europe and/or the US?
Following the US: 68%
Most respondents in the 'Following' category insisted that
there was "no reason why Asia couldn't be an innovator" or
that Asian issuers do have "unique needs".
"There's no easy answer. There is a wide gap between the
most sophisticated markets in Asia and the developing
markets. But in the more developed markets there is an
enormous appetite for cutting-edge products."
3) Are you worried about a lack of knowledge from retail
investors involved in structured products in Asia?
4) Do you think that banks and external counsel are doing
enough to raise awareness among investors of the risks?
No, but it's the job of the regulators: 23%
"We (the banks) are teaching the regulators the rules. As
products become more complex, we have to show them the
5) Which countries are you most concerned about?
Second equal: India, Indonesia
Others: Malaysia, Hong Kong, Singapore, Korea, Pakistan,
"Countries with higher wealth will be targeted for more
sales but it will be irrespective of the level of
financial education and understanding of the general
Some thought this view disingenuous, or rather too
general. Most agreed that China was a worry. One response
complained that "investors in China buy into an issue not
because of their understanding of the issuing company, but
because it is popular."
"There's a lot of liquidity, a lot of hungry issuers, but
very little knowledge. We run the risk of paying the price
"Taiwan regulators want to hold foreign product providers
responsible for suitability issues. And there seems to be a
more prevalent practice for disgruntled investors to lodge
complaints with the regulators when performance of certain
products is low, due to market factors, even if full and
proper disclosure was made in the first place."
ii. Covenant-lite loans
6) Are you worried about covenant-lite loans in Asia?
Not applicable anymore because of the credit markets: 15%
One general counsel summed up the situation: "As a lawyer,
taking a covenant-lite approach seems antithetical to the
whole risk management procedures we're carrying out
"The lack of a developed credit rating agency market
7) If so, do you think the risks are more pronounced in Asia
than the US and Europe?
iii. Local market transparency
8) What are your biggest fears when dealing with local
intermediaries in Asia?
Lack of knowledge/experience including foreign
Know Your Client checks: 23%
"In some small/medium cases, intermediaries haven't
cleared their clients. With a bulge bracket firm, you can
take a lot of comfort in knowing that they will. Smaller
intermediaries also have a lack of understanding of foreign
9) Which country is the biggest cause for concern?
Others: India, Korea, Taiwan
10) Are you worried that your in-house team could fall into
local market practice in certain Asian jurisdictions?
iv. Hedge fund regulation
11) Do you think there are problems with the Hong Kong
If so, what are your biggest concerns?
Consensus was: lack of black and white regulation
12) Are the regulators looking to the banks to internally
Many complained that while the regulators were indeed
looking for the banks to internally regulate hedge funds, if
they (the regulators) felt so strongly they should come up
with proposals themselves.
10) What form should hedge fund regulation take in Asia?
No one had any suggestions, citing a lack of global
examples of successful hedge fund regulation.
v. China (IPOs) dual listings
11) Are you happy with the disclosure made by Chinese
companies generally (on issues not lead by your bank) when
"I'm never happy with any of them"
12) If no, what areas do you think need further
"We need an increased understanding by Chinese companies
and a tightening of regulations."
"Chinese companies need to get some honesty in them."
"Company management needs to understand the importance of
13) Would a smoother mechanism for dual listing increase
simultaneous A+H listings?
"Yes, that and granting more licenses to international
investment banks and being less formalistic about the
vi. M&A transactions
13) Which countries in Asia do you see as primary growth
markets for your M&A transactions group?
First: China, India
Second: Taiwan, Korea
Others: Indonesia, Japan, Hong Kong
14) If any, which industry sectors stand out in terms of
increased M&A activity?
Second: oil and gas, telecoms
Others: technology, media, environmental
15) Which obstacles do you face when conducting M&A;
or do you see as potentially hindering M&A transactions
Varied responses included:
Increase in management buyouts
No uniform competition regime
Some local rules unclear
Regulatory hurdles in certain sectors
Regulatory uncertainty across the whole region
Insider dealing risks
Lack of transparency
vii. Dispute resolution and
16) What kind of disputes do you face or expect to
Generally, respondents agreed that were few disputes
now, but going forward the most likely areas for
Private debt finance
Prime brokerage business with defaulting hedge
Structured product suitability disputes
General credit issues arising from market
Third party/investor claims
Employment law matters
17) Do you have contingency plans for particular
products or countries?
"Yes, too many."
"We've got no fixed policy."
"It depends on the products."
18) Compliance is needed in 15 different jurisdictions.
Is your team stretched?
19) How likely is European-style, overarching
legislation? And why?
Nearly all respondents said it was unlikely, citing
the lack of homogeneity.
Sovereignty and transparency standards are also big
20) Do Chinese regulators put too much responsibility on
the sponsors on holding Chinese state-owned enterprises
"Yes, but they should do."
ix. Risk management
21) What do you regard as the key risks to investment
banks in Asia?
First equal: legal risk, reputational risk, market
Second: political risk
Third equal: loss of investment banking staff, credit
Others: regulatory impediments, syndicated loans