harvard business school publishing...most upset are the ones where we've seen senior management...

Harvard Business School Publishing

HBS Publishing Case Map for Gardner, Mills, Cooperman: Managing Financial Institutions,, Fifth Edition

(Thomson Southwestern College Publishing, 2005)

Includes reprints from Harvard Business Review (HBR)

The materials in this listing were selected by the textbook authors. Faculty at Harvard Business School were not involved in analyzing the textbook or selecting the cases and articles. Every case map provides only a partial list of relevant items from HBS Publishing. To explore alternatives, or to get more information on the cases listed below, visit our web site at www.hbsp.harvard.edu/educators and use the searching functions.

Case Title

Institution, HBSP Product Number, Length, Teaching Note

Geographical and Industry Setting, Company Size, Time Frame

Abstract, Key Subjects

Chapter 1: Changing Times for Financial Institutions

The Enron Collapse

IMD, Lausanne, Switzerland, IMD164, 26p, TN: IMD166

Global/US, energy, $100 billion, 2001

Charts the collapse of Enron and examines the role of various parties, including senior management, the board, and the auditors. Also looks at complex structures and accounting policies used to inflate both revenues and profits artificially and to conceal these from shareholders and others. Brings out key learning points on risk management, corporate governance, ethics, and controls of a complex enterprise.

The Fiduciary Relationship: A Legal Perspective

304064, 6p n/a Discusses the concept of a fiduciary, as developed in the Anglo-American common law tradition, and outlines the principal differences between the legal standard applied to fiduciaries compared to ordinary arms'-length contractors.

How to Restore the Fiduciary Relationship: An Interview with Eliot Spitzer

R0405D, 7p n/a Eliot Spitzer's investigations into the mutual fund and investment banking industries have made the New York State attorney general the de facto flag bearer of corporate reform. His exposure of conflicts of interest between investment bankers and research analysts in Wall Street firms led to the $1.4 billion global settlement between regulators and banking houses in 2003. In this interview, Spitzer describes the challenge of protecting public markets from conflicts of interest, paying particular attention to how such conflicts get institutionalized in an industry. "The cases that have gotten me and my fellow regulators most upset are the ones where we've seen senior management being tolerant of rank abuses," he

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says. "Because then you know that the entire structure is rotten." He also points the finger squarely at boards, maintaining that board members are drawn from pools of company and industry insiders. He cites "a void in values in a lot of boardrooms," holding up executive compensation as a powerful example. "Board compensation committees...are self-selected and interwoven--it's a rigged marketplace." He continues, "It would be interesting to see what the world would look like if CEO pay packages had to be submitted to shareholder votes." Spitzer suggests that what's really needed is for all business leaders to reinstill throughout their organizations the critical notion of a fiduciary duty--whether it is to the shareholder or to the customer. Using the mutual fund industry as an example, he also contrasts the value of enforcement with that of regulation and articulates an important--and surprisingly limited--role for government in protecting free markets

Chapter 2: Financial Institutions as Risk-Takers: Strategic Considerations

A Framework for Risk Management

94604, 12p n/a In recent years, managers have become aware of how their companies can be buffeted by risks beyond their control. To insulate themselves from such risks, many companies are turning to the derivatives markets, taking advantage of instruments like forwards, futures, options, and swaps. Although heavily involved in risk management, most companies do not have clear goals underlying their hedging programs. Without such goals, using derivatives can be dangerous. The authors present a framework to guide top-level managers in developing a coherent risk-management strategy. That strategy cannot be delegated to the corporate treasurer--let alone to a hotshot financial engineer. Ultimately, a company's risk-management strategy needs to be integrated with its overall corporate strategy. A risk-management program should have one overarching goal: to ensure that a company has the cash available to make value-enhancing investments.

Building a Strategy-Based Culture at Bank of Tokyo-Mitsubishi

B0211D, 3p n/a A major global enterprise--no matter how stunning its success--cannot run for long without a well-articulated strategy. Executives at Bank of Tokyo-Mitsubishi's Headquarters for the Americas (BTMHQA) knew that. They also knew the bank urgently needed to enhance its corporate governance framework and performance




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evaluation system. One year after adopting the Balanced Scorecard, BTMHQA has made remarkable progress in fortifying and integrating these systems--and the head office has taken note.

Value-At-Risk 297069, 11p n/a Introduces the student to the recently developed concept of value-at-risk (VAR) in risk analysis. By working through a stylized example using spreadsheet tools, the student learns the conceptual framework of VAR and its implementation mechanics. Teaching Purpose: VAR is a new approach to price risk management. Develops students' awareness of concepts and mechanics.

Chapter 3: Regulation, Technology, and Financial Innovation

Navigating the Changed Landscape of Corporate Governance

U0212C, 2p n/a In an effort to restore investor trust and spur economic recovery, Congress recently passed the Sarbanes-Oxley Act, the most significant overhaul of the nation's securities laws since the Securities Exchange Act of 1934. This new law overhauls corporate governance for publicly traded companies by imposing federal standards in an area that was traditionally under the guise of state corporation laws. Learn about the implications the new law will have on CEOs, CFOs, and all those who prepare your company's financial statements.

Chapter 4: Depository Institution Performance and Risk Analysis

Bank One: The Uncommon Partnership

Design Management Institute, Boston, MA, DMI009, 16p, TN: DMI010

US, banking, 1968-1998

This case chronicles the 30-year evolution of Bank One's business strategy of growth through acquisition and the resulting branding issues encountered by the need to rebrand the acquired existing entities. Begins in 1968--at the start of the newly formed First Banc Group of Ohio, Inc.--a holding company created by the McCoy family to acquire other small banks in the state of Ohio. The banks were to be renamed "Bank One." It continues through the next 30 years of growth, marketing innovations, and expansion to many states beyond its Ohio base. This period of growth and change produced numerous challenges to the company's identity. The principal focus of the case is on the major branding obstacles associated with Bank One's merger with First Chicago NBD, a very large commercial bank. First Chicago NBD represented the first major commercial bank to become a member of the Bank One family of dominantly retail banks. Issues encompass whether the First Chicago NBD name should be changed to Bank One, as had been done for all previous retail bank acquisitions over the years or retain its name using only the endorsement, "A Bank One


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Company." Further complicating the situation is a major Bank One brand development initiative intended to implement the Bank One brand identity in new ways for all Bank One entities.

The New Wachovia (A)

903033, 26p US, banking, $15 billion, 2001

In April 2001, First Union Corp. announced an agreement to merge with Wachovia Corp., a fellow North Carolina-based commercial bank. While the banks were preparing to consummate the merger, SunTrust Banks, Inc. of Atlanta, made a hostile offer for Wachovia, setting in motion an intense proxy fight with a forum encompassing the media, the courts, the investor community, and Wall Street. In July 2002, Kenneth Thompson, CEO of First Union, was considering First Union's next move knowing that Wachovia shareholders would convene on August 3 to decide the fate of the proposed transaction.

The New Wachovia (B)

903034, 25p US, banking, $15 billion, 2001

On August 3, 2001, after a hotly contested proxy fight, Wachovia Corp.'s shareholders voted to merge with First Union Corp. The managers of the two banks then turned to face the challenges of integrating the two organizations. Their task was to implement a "merger of equals" that would preserve the best parts of the two former companies while realizing the potential cost savings, operational efficiencies, and revenue gains that justified the combination in the eyes of the shareholders.

First Community Bank (A)

396202, 16p, TN: 399002

New England, banking, 1995

First Community Bank, a bank-within-a-bank at Bank of Boston, was established in 1990 as a unique venture to serve urban communities. By 1995 it has achieved profitability but must manage relationships with the mainstream at Bank of Boston, serve as a change agent and role model, and face the challenge of reexamining its mission and structure.

First Community Bank (B)

301086, 14p, TN: 302059

New England, banking, $13 million, 1995-2001

After nine years of leading First Community Bank (FCB), BankBoston's unique venture targeting low- to moderate-income communities, and finally gaining recognition and respect for her efforts, Gail Snowden must once again face the challenge of justifying FCB's value; this time to a new parent company, Fleet Bank, as part of the umbrella group Community Banking Group (CBG), formed in 1996 due to a merge with BayBank. To successfully integrate CBG/FCB into the mainstream organization, Snowden must face many organizational and cultural hurdles. Teaching Purpose: To gain better understanding of cultural strategic and organizational changes facing a venture as it becomes integrated into a












new organization. To learn what it means to be an internal change agent and how to overcome resistance to change within a corporate environment.

Shawmut National Corp’s Merger with Bank of Boston Corp. (A)

294119, 15p US, commercial banking, $1.3 billion, 1991

Presents the merger negotiations between Bank of Boston (BOB) and Shawmut National Corp. (SNC), two of the country's largest bank holding companies, and requires students to value BOB's current offer for SNC. Provides an overview of recent events and trends in the commercial banking industry including the rise of interstate mergers and bank failures. Teaching Purpose: 1) to analyze a large merger between bank holding companies; 2) to learn flows-to-equity valuation methodology; 3) to study ethical/managerial issues in canceled mergers; and 4) to provide an overview of recent trends in the banking industry.

Chase Manhattan Corp: The Making of America’s Largest Bank

298016, 31p, TN: 298127

New York/Global, banking, $15 billion, 1995

Chase Bank and Chemical Bank intend to merge, producing the largest commercial bank in the United States, and the fourth largest in the world. Projected financial benefits under the merger reflect significant planned reduction in operating costs, including 17,000 employee layoffs. Management also expects the merger to produce significant revenue increases as a result of increased economies of scale and scope, and other benefits of size and market leadership. The task of valuing the merger gains, negotiating an acceptable merger price, and implementing the post-merger restructuring is extremely complex. Teaching Purpose: To value the financial benefits resulting from a bank merger; to understand the important link between corporate strategy and value creation in corporate restructuring; to understand the issues that arise in negotiating and implementing a complex merger between two large institutions in an industry characterized by extreme change and uncertainty.

Chapter 5: Credit Unions and Savings Institutions Harrington Financial Group

297088, 15p Indiana, finance, 1997

In early 1997, Harrington Bank, a small Indiana savings and loan (thrift) wondered what its next move should be. Harrington was acquired in 1988 by the principals of Smith Breeden Associates, a money-management and consulting firm specializing in the application of modern financial technology to the pricing, hedging, and risk management of mortgage securities. The Smith Breeden principals had established an arms-length contract with Harrington, where Smith Breeden advised Harrington on the pricing, hedging, active management, and risk management of Harrington's
















assets and liabilities. Since the acquisition, the bank had done very well. Assets had grown from $75 million in 1988 to over $520 million at the end of 1996. Its net interest margin had more than tripled, core operating profits had grown by over 400%, and return on equity had been substantially increased. Still, Harrington in 1996 was not an average thrift. 80% of its assets consisted of mortgage-backed securities (vs. 30% for the median thrift), and most of its liabilities were not deposits but other forms of wholesale funding.

Savings and Loans and the Mortgage Market

297090, 8p n/a Provides a brief overview of the history of the savings and loans, the savings and loans crisis of the 1980s and 1990s, and the creation of the mortgage markets in the United States. Also explains briefly the most common types of mortgage-backed securities available.

Chapter 6: Capital Regulations and Management Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A)

203035, 23p, TN: 203-055

Global, project finance/banking, 2002

In June 1999, the Basel Committee on Banking Supervision announced plans to revise the capital standards for banks. The Basel Committee believed that project loans were significantly riskier than corporate loans and, therefore, warranted higher capital charges under the new proposal (known as Basel II). Bankers, fearing that higher capital charges would damage project lending by lowering profits and driving borrowers to nonbank competitors, formed a consortium to oppose the proposal by studying the actual default and loss characteristics of their combined portfolios of project loans. The study showed that project loans were not riskier than corporate loans. Armed with this data, the consortium sent a letter to the Basel Committee in August 2002 urging them to lower the proposed capital charges on project finance loans.

Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (B)

204094, 5p Global, project finance/banking, 2002

Supplements the (A) case.

Credit General, S.A.

296011, 13p Banking, 1995 The head of a bank's asset and liability committee has to approve an unexpectedly large overnight currency exposure, or require that the exposure be reduced but at great cost. Teaching Purpose: 1) To discuss the concept of value-at-risk and its possible uses; and 2) The problems of risk management and capital allocation in a modern-day principal financial firm.





















Chapter 7: Changes with Technology: Securitization, Structured Financing, Internet Banking, and the Role of Financial Institutions in E-Commerce

The Enron Odyssey (A): Special Purpose Enterprises (SPEs)

204009, 27p Houston, TX, energy, $100 billion, 2001

The board has asked Ron Tolbert, an employee in the Risk Assessment and Control Group, to analyze three SPE transactions executed by Enron executives: the Destec, Rhythms, and Fishtail/Bacchus transactions, which were prominently featured in the Examiner's Report in the ensuing Enron bankruptcy. Tolbert's job is to assess why Enron used SPEs for these transactions, whether risk was successfully transferred off the balance sheet, and whether risk transfer was the only motivation.

Fremont Financial Corp. (B)

294099, 9p Los Angeles, CA, banking, $25 million, 1993

Fremont has a third option to finance its loan portfolio, which involves securitizing and selling the small-business loans into the capital markets. Emphasizes asymmetric information and moral hazard problems involved in designing an asset securitization. When used in conjunction with the (A) case, the sequence highlights the relative strengths and weaknesses of institutions and markets in providing solutions to funding problems. Teaching Purpose: Can be used to highlight the differences between financial markets and financial intermediaries in the modern capital-raising process.

Fremont Financial Corp. (C)


Supplements the (B) case

Great Dakota Bank: Online Banking

603011, 17p Banking, 2002 In 2002, Great Dakota Bank's retail division is considering how heavily it should be promoting the company's online banking service. A recent promotional campaign appears to have significantly increased enrollments in online banking, but it is unclear whether the bank should continue to trade promotional incentives for online subscriptions. Contains data that force students to consider the impact of adding a new low-cost channel (the Internet) on consumer behavior; this analysis raises questions about whether the new channel does, in fact, lower the cost to serve customers.

Citibank’s e-Business Strategy for Global Corporate Banking

University of Hong Kong, HKU197, 13p, TN: HKU198

Hong Kong, banking, 2001

In 2001, Citibank's Cash and Trade Group division transformed itself into an e-business, with the strategic intent of converting traditional money management business into an e-business framework. This case discusses how Citibank is using its traditional assets and integrating Internet initiatives into its e-business strategy to create sustainable competitive advantages. Competition















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in the cash and trade business is becoming intense and a new breed of competent and aggressive competitors is vying for the market, including technology companies interested in B2B e-payment. Citibank is responding to the competition by continually evolving its e-business strategy--connect, transform, extend. Also looks into the challenges that Citibank e-Business Group is facing in developing a single global web platform for the corporate market. The focus is on how Citibank is developing an e-business product that would serve the highly segmented market and how to encourage these markets to use a global single platform online. At one end of the spectrum are multinationals and top-level domestic corporates that operate sophisticated treasuries, and at the other end are companies and small- and medium-size businesses that are not yet ready to upgrade and transform their systems.

First Direct (A) 897079, 30p Leeds, U.K., banking (retail), 1996

Describes the operations and strategy of the world's largest, fastest growing branchless bank. Using a person-to-person interface over conventional phone lines, First Direct provides standard banking and related financial products to nearly 700,000 customers throughout the United Kingdom. By employing a sophisticated customer information system and a highly educated workforce on the frontline, the bank has achieved customer satisfaction and retention levels that are roughly twice those of its nearest competitor in either direct or traditional retail banking services. This outcome was achieved through the use of information infrastructure to personalize services, model preference profiles, and cross-sell relevant products in the course of over-the-phone banking interactions. This breakthrough service model has demonstrated that banks may deliver greater quality of service at significantly lower costs by exploiting virtual or "marketspace" channels for service delivery and customer relationship management. The question facing the bank, a unit of Midland plc (which was, in turn, owned by HSBC), was how fast, in what manner, and in what market segments the organization should grow.

First Direct (B) 898145, 2p Leeds, U.K., banking (retail), 1996

Supplements the (A) case

Capital One Financial Corp.

700124, 28p, TN: 704467

Fairfax, VA, credit cards, $3 billion, 1988-2000

Designed to explore the structure, implementation, and sustainability of an information-based strategy (IBS) undertaken by Capital One during the 1990s. Particular issues of interest are the impact of mass








customization on industry structure, the ability to transfer IBS skills to new sectors, and the impact of the Internet on industry structure and competitor strategies.

Chapter 8: Interest Rates, Exchange Rates, and Inflation: Theories and Forecasting

Investing in Japan

203036, 29p Japan, investment management, 1980-2000

The evolution of the macroeconomic environment, capital markets, financial institutions (including banks, public and private pension funds, and mutual funds), and financial regulation in Japan during the period 1980 to 2002, are examined long-term demographic projections for Japan are presented.

Chapter 9: The Term Structure of Interest Rates No cases for this chapter

Chapter 10: Interest Rate Risk Measurement and Immunization Using Duration

No cases for this chapter

Chapter 11: Interest Rate Risk Management: Interest Rates and Foreign Currency Futures

Banc One Corp. (A)

195207, 32p Columbus, OH, banking, $6 billion, 1993

As Banc One's use of derivatives had proliferated, investors and analysts had expressed increasing concern about the size of derivative portfolios, the potential sensitivity of their value to interest rate swings, and the lack of standardized reporting on their use. The case looks at Banc One's attempts to maintain stock value through annual report disclosure of derivatives and presentations on derivatives; traces derivative use at Banc One; and describes FASB statements on derivatives.

Banc One Corp. (B)

195257, 3p Columbus, OH, banking, $6 billion, 1993

Supplements the (A) case

Derivative Markets: Structure and Risks

295009, 17p n/a Gives a conceptual understanding of derivative products, their applications, and valuation. After a brief treatment of exchange-traded derivatives, explores over-the-counter (OTC) derivatives, emphasizing the market, credit, legal, operational, and other risks associated with these instruments.

Applications for Financial Futures

286109, 23p, TN: 287044

n/a Consists of a series of four brief descriptions of the use of financial futures as hedging vehicles: a savings and loan hedging the rollover of three-month money market certificates with T-bill futures, a corporate debt issuer hedging the cost of a future debt issue with T-bond futures, an equity investor hedging a decline in the market, and an example of a company with a natural interest rate
















hedge on its balance sheet. The examples describe the details of T-bill, T-bond, and S&P 500 stock index futures. Issues addressed include variation margin and basis risk (due to differences in the securities underlying the cash and futures positions, changes in the carry, etc.).

The International Securities Exchange: New Ground in Options Markets

203063, 38p New York, NY, financial, 2002

This case examines the equity options market and studies the major parties involved and the options trading process. It takes an in-depth look at the path taken by the International Securities Exchange as it entered a mature exchange industry and transformed itself into a major competitor. The concepts of liquidity and transaction costs are presented.

Banque Paribas: Paribas Derives Garantis

295008, 9p Europe, finance, FFR 880, 1993

In March 1993, the management of Paribas Capital Markets is making a final review of the proposal to set up Paribas Derives Garantis (PDG), a special-purpose subsidiary of Compagnie Financiere de Paribas (CFP), that would guarantee derivative products offered by Banque Paribas. The proposal is unique in a number of ways and CFP will be the first banking group to create such a subsidiary. The management of Paribas Capital Markets now has to present to the board of directors of CFP, Banque Paribas's parent, the logic for forming PDG, the structure of the subsidiary, and a justification for the required commitment of capital. In conjunction with Derivative Markets: Structure and Risks, can be used to explore the structure and risks of the OTC derivatives market, and in more detail, the creation of a triple-A subsidiary and credit risk management.

Chapter 12: Interest Rate Risk Management: Index Futures, Options, Swaps, and Other Derivatives

Banc One Corp.: Asset and Liability Management

294079, 29p, TN: 298039

Columbus OH, commercial banking, $4.3 billion, 1993

Banc One's share price has been falling recently due to analyst and investor concern over the bank's heavy use of interest rate derivatives. Dick Lodge, chief investment officer in charge of the bank's investment and derivative portfolio, must recommend to the CEO a course of action to allay investors' fears and communicate to the market the reasons for Banc One's use of derivatives. The bank uses interest rate swaps to manage the sensitivity of its earnings to changes in interest rates and as attractive investment alternatives to conventional securities. Teaching Purpose: Five objectives: 1) to teach students how banks measure and control their interest rate exposure; 2) to show how derivatives, specifically swaps, can be used as synthetic investments that are an alternative to traditional investments; 3) to highlight the salient
















differences between traditional investments and these synthetic investments (credit, regulatory capital, financial ratios, and liquidity); 4) to understand how the use of derivatives creates a need for other risk-management strategies (basis swaps); and 5) to highlight one institution's management policies to monitor and control derivatives activities.

USAA: Catastrophe Risk Financing

298007, 19p United States, property insurance/reinsurance, $4.7 billion, 1997

Describes the first major risk financing using catastrophe bonds. Provides a basis for discussing the securitization of insurance risks.

Mid Ocean Ltd.: Trading Catastrophe Index Options

298073, 20p, TN: 298108

Bermuda/Caribbean, insurance, 1997

Written from the viewpoint of an insurance industry executive who is evaluating the potential of a set of newly-offered catastrophe insurance derivatives. Background addresses the roles of traditional reinsurance and securitization efforts in providing risk transfer and risk financing in the "cat" insurance field. The benefits and difficulties involved in commoditizing a new asset class are explored as well. Teaching Purpose: For students to explore and better understand how new risks can be brokered, securitized, and eventually traded.

First American Bank: Credit Default Swaps

203033, 18p, TN: 203101

New York, NY, banking, 2002

This case examines a bank's ability to manage its credit exposure to a particular client using credit default swaps.

Collateralized Loan Obligations and the Bistro

299016, 27p United States, financial, $10 billion, 1998

Examines a large bank trying to protect itself from the risks and capital requirement created by its loan portfolio. Considers a variety of ways available to the firm to offload the risks. Teaching Purpose: Credit risk management.

Overview of Credit Derivatives

297086, 10p n/a Presents the history and features of credit derivatives, a new class of securities. A stylized problem is also provided. Teaching Purpose: To present analytical models of credit risk, derivatives thereon, and provide insights into application of credit risk methods to portfolio settings.

Interest Rate Derivatives

294095, 11p, TN: 296063

n/a Introduces and explains the six major interest rate derivative products: swaps, forward rate agreements, Eurodollar futures, bond options, caps/floors/collars, and swap options. Teaching Purpose: Provides students with an introductory knowledge of the basic interest rate derivative instruments used in the market today. It will walk students through both the cash flows involved and the institutional differences between each of the instruments.

Chapter 13: Commercial, Consumer, and Mortgage Lending

U.S. Bank of 292057, 23p, Seattle, WA, A vice president of the U.S. Bank of Washington,























Washington TN: 298021 banking, 1990 a subsidiary of U.S. Bancorp, is asked to review a

$6.5 million loan request from the Redhook Ale Brewery, a Seattle-based microbrewery. The case provides an understanding of the U.S. commercial banking industry and the role of a loan officer, and asks the student to assess a proposed loan. Provides an opportunity for financial statement and cash flow analysis.

Clarkson Lumber Co.

297028, 6p, TN: 297076

United States, retail lumber, $3 million, 1991

The owner of a rapidly growing retail lumber company is considering the financial implications of continued rapid growth. The magnitude of the company's future financing requirements must be assessed in the context of the company's access to bank finance and/or equity finance. A rewritten version of an earlier case.

Millegan Creek Apartments

395118, 26p, TN: 396144

Austin, TX, real estate/banking, $400 million, 1994

Fleet Bank is considering a construction loan for a 390-unit apartment project in Austin, Texas. The case describes the location, market, product, and other real estate factors the bank needs to consider in making this loan. Also discusses the financial and construction risks involved in structuring this kind of credit facility.

Cartwright Lumber Co.

204126, 4p United States, retail lumber, $3.6 million, 2004

The Cartwright Lumber Co. faces a need for increased bank financing due to its rapid sales growth and low profitability. A rewritten version of an earlier case.

Adelphia Communications Corp.

198031, 29p, TN: 100086

United States, cable broadcasting, $233 million, 1996

A bank officer must make a loan application decision for a large but financially troubled cable broadcaster.

Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan (A)

201072, 22p, TN: 201087

Asia, entertainment/banking, 2000

In late 1999, the Walt Disney Co. and the Hong Kong government agreed to develop Hong Kong Disneyland, a HK$28 (U.S.$3.6) billion theme park and resort complex planned to open in late 2005. As part of the total financing package, the sponsors decided to raise HK$3.3 billion of non-recourse bank loans for construction and working capital, and selected Chase Manhattan Bank to underwrite and syndicate these facilities. This case concerns the process by which Chase successfully competed to lead this transaction. The key questions facing Chase were whether to bid at all, how to bid, and how to structure the syndication to meet the borrower's needs, its own profit objectives, and the market's expectation for an attractively priced credit. Includes a generic section about the process, participants, and economics of syndicated lending for students who are unfamiliar with syndicated lending. This is part of a module on Financing Projects in the Elective Curriculum (EC) course Large-Scale Investment (LSI). Although written for a course on project


















finance, it can easily be modified for courses on capital markets or financial institutions.

Williams--2002 203068, 17p, TN: 204127

United States/Global, energy, $11 billion, 2002

Williams, a Tulsa, Oklahoma-based firm in various energy businesses, must decide whether to accept a financing package offered by Berkshire Hathaway and Lehman Brothers. The proposed one-year credit facility would provide the firm with financial resources in a difficult period.

Chapter 14: Liquidity Reserves and the Securities Portfolio

No cases for this chapter Chapter 15: Deposit and Liability Management No cases for this chapter Chapter 16: Insurance Company Financial Management Issues

Ebao Technology: An E-Insurance Enabler

Richard Ivey School of Business/UWO, London, Ontario, 901M54, 25p, TN: 801M54

China, insurance and pension funds, 2000

Ebao is a year-old web-based technology company whose founders believe that their e-insurance programs and products have the potential to improve the overall efficiency of China's traditional insurance industry. In its first year of operation, Ebao has grown into a 70-person organization with offices in Shanghai and Beijing, and almost all of the major insurance companies in China have signed up with the company's web site and are using its e-insurance applications. Ebao's CEO and founder has a long list of challenges to confront in the coming year. The company needs to strengthen its market position in the face of rapidly growing competition and to sustain its rapid growth in a year full of market downturns. As well, Ebao's management team has targeted to achieve break-even by the end of the current year. The company's CEO must determine a concrete business strategy that will lead Ebao onto the next stage of success. His challenge is to build competitive advantage in the new Internet industry and in an emerging market.

National Insurance Corp.

296036, 23p, TN: 298118

United States, insurance, $3.8 billion, 1990-1995

Visits the catastrophe insurance business at an interesting time in the history of the insurance markets. A major reinsurer, National Insurance Corp., is taking a look at the new insurance derivatives being traded on the Chicago Board of Trade with a view to using them for risk management, and as a portfolio option. Within this setting, a wide range of objectives are achievable, such as understanding how P&C insurance companies make money, what their risks are, why catastrophic risk is fundamentally different from other types of insurance risk, what drives supply and demand in these markets, how risks are hedged, how the new contracts will be priced, who


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will buy and sell them, whether there is a need for government regulation, and finally, whether the company should initiate trading in these contracts. Teaching Purpose: Provides a setting for understanding a growing trend in the capital markets, where large non-diversifiable risks (such as disasters, pollution risk, etc.) are now finding markets in which trading can occur.

Shaping Spaarbeleg: Real and Unreal

IMD, Lausanne, Switzerland, IMD109, 20p

Netherlands, insurance and financial services, 1991

Describes the total transformation of a wholly owned subsidiary of Aegon, one of the largest insurance companies in the Netherlands, which deals in the sale of financial instruments, such as annuities, savings, and investment products. The new managing director forms a management team, and together they segment the market, introduce a variety of distribution methods, and increase sales by dramatic amounts while keeping the number of staff constant. Looks at team building, market segmentation by focusing on customer values, distribution strategy, and management philosophy. An ECCH award winner.

Tom Paine Mutual Life Insurance Co.

291030, 29p, TN: 292058

Boston, MA, life insurance, $26 billion, 1990

A junior portfolio manager at a major life insurance company must choose among various public and private debt alternatives in connection with the funding of a new Guaranteed Investment Contract. The case serves as an introduction to life insurance companies as suppliers of intermediate- and long-term financing and to the key differences between public corporate debt, private corporate debt, and commercial mortgages.

Provident Life and Accident Insurance: The Acquisition of Paul Revere

202044, 21p, TN: 202046

Chatanooga, TN, insurance, $2.555 billion, 1996

Provident Life & Accident Insurance Co. has made an initial bid to acquire a primary competitor, Paul Revere, from conglomerate, Textron. The due diligence process uncovers a significant block of problematic disability insurance policies. Provident is forced to assess the negative impact of this discovery on its initial valuation and revise its bid. In the process, the divergent views of the evolution of these policies by the bidder and seller have to be translated through discounted cash flow analysis into appropriate bid prices. Finally, this DCF analysis, in combination with multiples analysis, is used in negotiations with Textron and public shareholders.

Mercer Management Consulting (A)

403009, 14p Washington, D.C., management consulting, $100 million, 1989-2001

Insurance giant Marsh & McLennan acquires management consulting firms Temple, Barker & Sloane (TBS) in 1987 and Strategic Planning Associates (SPA) in 1990 and sets out to merge the two. The merger proceeds slowly and painfully. Following the February 1990 merger, George Overholser and Ware Adams face difficult


















decisions. Overholser, a principal at Mercer, must decide how to meet the challenge of leading an effort to integrate the two firms. Adams, a Mercer associate, must decide whether to leave the firm to join Dean & Co., a spin-off recently founded by former partners Dean Wilde and Dean Silverman. Overholser, who had also been invited to join the Deans, had already declined the offer when the case opens. Overholser, Adams, Wilde, and Silverman are all formerly of SPA, a firm whose culture and business model differed markedly from that of TBS. Walker Lewis, founder of SPA, arrived at the terms "industry knowledge consulting" and "expertise consulting" to describe TBS's approach and "analytical consulting" and "model-driven consulting" to describe SPA's.

Chapter 17: Investment Banks, Securities Firms, and Venture Capitalists

Hambrecht & Quist

898161, 19p, TN: 801140

San Francisco, CA, investment banking, $346 million, 1997

Hambrecht & Quist (H&Q), an investment bank headquartered in San Francisco, has a very unique culture relative to its Wall Street counterparts. Firm members and even competitors describe the culture as entrepreneurial, team-driven, non-bureaucratic, and change-oriented. H&Q's unique culture has given it a number of competitive advantages, including the ability to attract high-quality staff, the ability to win business among its target group of emerging growth companies, and the ability to maintain below-average SG&A costs. However, competition in the investment banking industry is intensifying in 1997-98 due to an unprecedented wave of mega-mergers between investment banks and commercial banks. The new combined banking entities are able to offer customers a broader array of products and services than H&Q is able to offer, creating a significant amount of pressure for H&Q to sell to, or merge with, another financial institution itself. Industry analysts believe it is not a question of whether, but rather of when H&Q will lose its independence. However, H&Q management believes that "selling out" would destroy the very culture that made the firm successful. What action should Dan Case, the CEO and chairman of H&Q, take to balance the seemingly competing demands of maintaining the firm's culture and positioning the firm for future growth?

The Process of “Going Public” in the United States

105016, 5p n/a Summarizes the process of going public: the steps for SEC approval, the role of the SEC, and the roles of major players such as underwriters and printers.










Competition in Japanese Financial Markets--2002

702455, 33p, TN: 704432

Japan, investment banking, 2001

In early 2002, Japan, the world's largest economy, had been mired in a decade-long recession. A range of stimulus packages had failed to work their magic. The "Big Bang" financial deregulation reforms announced in 1998 had not quite produced the economic boom that the government had anticipated. Japan struggled to find its place in the increasingly global 21st century. Japan's commercial banks, once the largest in the world, struggled under the weight of their nonperforming loans. Japan's investment banks--the likes of Nomura--remained powerful behemoths. But they had scaled back their global ambitions and were in danger of being eclipsed in their own backyard by a range of foreign financial intermediaries. Meanwhile, the terrorist attack on the United States on September 11, 2001, accelerated a U.S. economic recession and raised the level of uncertainty in the global business environment across the board. It also contributed to the global investment banking industry's worst slowdown since the 1970s, with large firms recording worldwide slumps in revenues and profits of between 40% and 50%.

Kidder, Peabody & Co.: Creating Elusive Profits

197038, 21p, TN: 198036

United States, financial services, 1991-1994

On April 17, 1994, Kidder, Peabody & Co. announced a $350 million charge against earnings resulting from the discovery of false trading profits. That same day, the termination of Joseph Jett's employment with the company was made public. By illustrating the mechanics of bond accounting, this case describes the trading strategy that led to the creation of false profits. Failures of internal control are also discussed. The case ends by asking who was to blame.

Venture Capital Case Vignettes

801408, 5p, TN: 802052

2000 Presents three fictionalized but realistic situations in which a venture capitalist may find himself. One situation requires crisis intervention to quell a dispute between a vice president of sales and a CEO; another poses the problem of working out the composition of a board of directors; and the third examines the problem of dividing stock among founders.

A Note on Private Equity in Developing Countries

297039, 11p, n/a Provides an overview of the fund raising and investment process in private equity funds active in developing nations, as well as a discussion of the rationales for, and future of, these funds.

Long-Term Capital Management, L.P. (A)

200007, 23p Connecticut, finance, 1997-1998

Long-Term Capital Management, L.P. (LTCM) was in the business of engaging in trading strategies to exploit market pricing discrepancies. Because the firm employed strategies designed to make money over long horizons--from six months





















to two years or more--it adopted a long--term financing structure designed to allow it to withstand short-term market fluctuations. In many of its trades, the firm was in effect a seller of liquidity. LTCM generally sought to hedge the risk--exposure components of its positions that were not expected to add incremental value to portfolio performance and to increase the value-added component of its risk exposures by borrowing to increase the size of its positions. The fund's positions were diversified across many markets. This case is set in September 1997, when, after three and a half years of high investment returns, LTCM's fund capital had grown to $6.7 billion. Because of the limitations imposed by available market liquidity, LTCM was considering whether it was a prudent and opportune moment to return capital to investors.

Chapter 18: Mutual Fund and Pension Funds Management

Retail Financial Services in 1998: Fidelity Investments

799053, 7p Retail financial services, 1998

Provides an overview of Fidelity Investment's current strategy for retail financial services. Retail Financial Services in 1998 should be given to all students as background material. The class should then be split into groups, with each group receiving one of the following cases: Retail Financial Services in 1998: Charles Schwab, Retail Financial Services in 1998: Fidelity Investments, Retail Financial Services in 1998: First Union, Retail Financial Services in 1998: Merrill Lynch, or Retail Financial Services in 1998: Travelers to prepare in order to understand how each player is attempting to capture value in the converging world of retail financial services.

Retail Financial Services in 1998: Charles Schwab


Provides an overview of Charles Schwab's current strategy for retail financial services. Retail Financial Services in 1998 should be given to all students as background material. The class should then be split into groups, with each group receiving one of the following cases: Retail Financial Services in 1998: Charles Schwab, Retail Financial Services in 1998: Fidelity Investments, Retail Financial Services in 1998: First Union, Retail Financial Services in 1998: Merrill Lynch, or Retail Financial Services in 1998: Travelers to prepare in order to understand how each player is attempting to capture value in the converging world of retail financial services.

Retail Financial Services in 1998: Merrill Lynch


Provides an overview of Merrill Lynch's current strategy for retail financial services. Retail Financial Services in 1998 should be given to all










students as background material. The class should then be split into groups, with each group receiving one of the following cases: Retail Financial Services in 1998: Charles Schwab, Retail Financial Services in 1998: Fidelity Investments, Retail Financial Services in 1998: First Union, Retail Financial Services in 1998: Merrill Lynch, or Retail Financial Services in 1998: Travelers to prepare in order to understand how each player is attempting to capture value in the converging world of retail financial services.

AMVESCAP in 1999

701016, 26p Atlanta, GA, mutual funds, 1999

Deals with the problems faced by a major mutual fund company as it attempts to respond to the threats and opportunities posed by the explosion of the Internet and the changing landscape of retail financial services.

Managing a 401(k) Fund

204077, 10p 2003 Focuses on an individual's decision to participate in his firm's 401(k) plan and how to invest his contributions. Plan participants have a choice of 10 mutual funds with different investment strategies. Includes data from Morningstar on the composition and performance of the different funds and information on different asset allocation strategies provided by the fund administrator, T. Rowe Price.

Pension Roulette: Have You Bet Too Much on Equities?

HBR article, R0306G, 5p

n/a In the 1990s, funding pension obligations by investing in stocks looked smart. By 1999, the bull market had poured a collective $260 billion surplus into the pension coffers of the S&P 500, permitting the companies to record the year-to-year increases as additional income. But just two years later, the bear market had obliterated those gains, replacing them with a cavernous $240 billion deficit--which had to be offset by the unlucky firms' ongoing cash flows, wreaking havoc on their earnings, debt levels, and stock prices. Corporate executives may be blamed for this debacle. But they were only following the rules. Current accounting guidelines keep companies from recording pension liabilities and assets on their balance sheets, instead relegating them to the footnotes. That makes it hard to see the risk to which market drops expose companies. Board members and top executives need to look beyond distorted accounting numbers to the economic realities of pension plans. Once they do, they may be surprised to find that they would gain far greater value and flexibility by passively investing their pension funds entirely in bonds. A bond portfolio can be designed to meet precisely, and with virtual certainty, a company's pension





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obligation, thus eliminating the chance of a funding gap. The predictability of bond investments also stabilizes earnings and cash flow. The expanded corporate debt capacity that results can then be used to fuel growth or reduce the firm's overall cost of capital.

Fixing the Pension Fund Mix

HBR article, F0403E, 2p

n/a Wise allocation of assets across both stocks and bonds can help companies reap higher returns from an asset mix that includes equities without assuming unacceptable risk.

Chapter 19: Managing Diversified Financial Services Firms: Corporate Governance and Merger and International Considerations

E-Loan: The CarFinance.com Acquisition

400072, 16p San Francisco, CA, e-commerce/mortgages/personal credit, $22 million, 1999

E-Loan is an online mortgage lender that acquired an auto-lending arm in August of 1999. This case examines E-Loan's purchase of CarFinance.com and highlights E-Loan's strategy-setting process. In addition, the case explores business development as a strategic process in the fast-moving e-commerce environment.

Fremont Financial Corp. (A)


Highlights the relationship between financial markets and financial intermediaries in the capital-raising process. Fremont Financial is an asset-based lender to middle market companies. This case considers two options for Fremont to raise capital to finance its loan portfolio. Fremont can: 1) extend its existing bank line of credit, or 2) issue commercial paper through a special purpose conduit. Emphasizes comprehension of Fremont's business as a non-bank lender and the manner by which these two financing choices address asymmetric information and moral hazard problems endemic to financial intermediation. Teaching Purpose: Can be used to highlight the differences between financial markets and financial intermediaries in the modern capital-raising process.

A New Road Map to Performance Management: Volvofinans and the BSC

Balanced Scorecard Report Article, 3p, B0301B

n/a When Sweden's Volvofinans made its first foray into building a Balanced Scorecard in 1996, its executives never dreamed that within a few years it would someday be named to the BSC Hall of Fame--or that it would receive the highest overall ranking among Swedish finance companies. But Volvofinans won both such honors in 2002. For this small but powerful lender, the Balanced Scorecard has illuminated a route to impressive success--though not without a few bumps along the way.

Branding Citigroup’s Consumer

504023, 22p New York, financial systems, $92,556 million, 1998

In Spring 1998, Citicorp and Travelers merged to create a financial powerhouse that united the bank with Travelers' consumer finance and brokerage

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Business businesses, including Salomon Smith Barney and

Primerica. It was the first U.S. financial services company to combine banking, insurance, and investments under one umbrella. Both entities historically had very different cultures, driving a radically different approach to branding. During completion of the merger, a team of managers was responsible for recommending to top management a new brand identity that would unite the entire organization and provide it with a strategic focus. The new brand also had to inform customers and shareholders of Citigroup's new financial capabilities and allow cross-selling without sacrificing the power of component brands. In a tense post-merger situation, decisions must be made early and decisively to prevent damaging brand equity.

The Toronto-Dominion Bank: Green Line Investor Services--1996

Richard Ivey School of Business/UWO, London, Ontario, 97A010, 25p, TN: 897A10

Canada/US, security and commodity brokers, dealers, 1996

In mid-January 1996, Keith Gray, executive vice president, Investor and Trust Services Division, The Toronto-Dominion Bank, and chairman, Green Line Investor Services, was trying to decide whether he should request the authorization of the bank's top management to begin negotiations to acquire Waterhouse Investor Services, Inc. Waterhouse was the fourth largest discount brokerage firm in the United States, and the acquisition, if consummated, would be the largest in the history of the bank. The case describes the major strategic moves of Green Line from its establishment in 1984 to the proposed Waterhouse acquisition in 1996. During this period, Green Line became the dominant discount broker in Canada. The Waterhouse acquisition would represent its first major move into the global discount brokerage market. One of the challenges in the case is trying to understand the reasons for Green Line's success in Canada and the potential transferability of its customer value and profit creation model to the highly competitive U.S. market.

Accounting for Mergers and Acquisitions

101021, 7p n/a Discusses merger and acquisition accounting.

Making the Deal Real: How GE Capital Integrates Acquisitions

HBR article, 98101, 11p

n/a Thousands of companies every year acquire other companies, or are acquired themselves. This event is usually painful and messy--and statistics show, it is frequently unsuccessful as well. Nearly half of all mergers fail. One company that has made a fine art of the acquisition integration process, however, is GE Capital, which has integrated hundreds of companies in the past decade. Consultants Ron

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Ashkenas and Suzanne Francis, and Lawrence DeMonaco of GE Capital, offer four lessons from the company's successful run.

harvard business school publishing...most upset are the ones where we've seen senior management...

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