21 THE NEXT... RESERVE CURRENCY
WOCUNOMICS

AS THE US struggles with a hefty deficit and inflationary pressures loom, the dollar’s status as global reserve currency is under threat. Proffered alternatives include the euro, rouble and renminbi – but the real winner could be a brand-new instrument that started life on the back of a London train ticket.

The world currency unit, or Wocu, is the brainchild of Michael King, a financial IT professional. A synthetic instrument based on the weighted exchange rates of the top 20 currencies by GDP, it is designed to reduce the vola-includes details on when and where such activity occurs, as, unlike C02, the ecological and social impacts tend to be local. The footprinting encompasses three categories: blue (surface and groundwater), green (rainwater stored in soil), and grey (the volume of water required to dilute pollutants to agreed quality standards).

In November 2008, the Water Footprint Network (WFN) formed to coordinate and disseminate knowledge on footprinting methods and tools. Since then, the stakes have been raised by putative moves such as the International Organisation for Standardisation’s new water footprint standard, with input from the WFN; and the

tility of cross-border cashflows and take the politics out of foreign exchange transactions.

King had the idea for the Wocu in 1996, but until last year he had a hard time selling his vision to investors. Post-credit crunch, and with the collapse of the dollar, the Wocu began to look like a more viable proposition and, in May, King finally secured funding, from London-based venture capital firm Flex Group.

By September, algorithms to create a Wocu spot price were in place and the currency was introduced with a symbolic trade on the Bordeaux Wine Exchange. King and his team are now working on interest rate curves for the Wocu and hope to have a full set of derivatives on offer with major exchanges soon after the currency’s official launch in January.

So could the Wocu really replace the dollar as the unit of global trade? King says it has something for everyone: corporates will get more stable cashflows, brokers will have a new instrument to trade, central bankers will be able to stop fretting over exchange rates, and nationalist politicians will no longer need to fight their currency corners. Maybe now the world will seriously consider the Wocu.

22 THE NEXT... PREDATORS
THE CANADIANS

THE CREDIT crisis of 2007-09 is hopefully behind us, having crushed some of the world’s most powerful financial institutions. The banks that emerge from the wreckage will be very different from those that strutted during the go-go years of derivatives-powered finance.

So who will be the next titans of investment banking? Embattled European and US banks will almost certainly now be subject to heavy regulatory control, while those of Japan that are looking to expand are focused on Asian emerging markets.

Moving rapidly up the curve, however, is Canada. Derided for years as safe, conservative and frankly dull, its banking system is now reaping the rewards of these old-fashioned virtues. US and UK regulators are looking to the Office of the Superintendant of Financial Institutions Canada for lessons on reducing systemic risk, and the country’s big five banks – Bank of Montreal, Bank of Nova Scotia (Scotiabank), CIBC, Royal Bank of

Canada (RBC) and Toronto-Dominion Bank (TD Bank) – all survived the crisis without dipping into the government purse and with tier one capital ratios in excess of 10%.

Weaker US banks are the obvious targets for ambitious players from north of the border – TD Bank has shown the way with its seamless integration of Commerce Bank, and Scotiabank is rumoured to be looking at a US acquisition to complement its recent expansion in Latin America and the Caribbean.

The prime candidate for membership of the global banking elite, though, is RBC – its capital markets division has long been one of the leading dealers of US Treasuries and is now on a hiring spree in London to boost its European fixed income and infrastructure businesses.

In true Canadian style, further expansion is likely to be cautious – but with strong balance sheets and a host of tempting opportunities, even Canada’s banks are unlikely to be able to resist a shot at the big time.

23 THE NEXT... FILM FRANCHISE:
PRINCE OF PERSIA

IN HOLLYWOOD “tentpoles” are films that studios bet the farm on because their projected profits are all but certain to prop up other hit-or-miss releases. Each blockbuster has enough production and global marketing spending to fund the WHO for a year. And, perhaps even more crucial to their success, their releases are pegged to the prized holiday opening slots in the US calendar.

Films produced by Jerry Bruckheimer, the man behind the Pirates of the Caribbean (POTC) series, are invariably classed as tentpoles, which is why Disney felt emboldened enough two years ago to advertise a summer release for his next project — Prince of Persia: The Sands of Time — even without a script, director or any cast members.

Based on the popular computer game series, the €135m production stars Jake Gyllenhaal as the rogue prince, with Bond girl Gemma Arterton as his mysterious princess sidekick. There is the suspicion that films from videogames, as opposed to comic-books, just don’t hold the appeal for either gamers or ordinary moviegoers. But having turned POTC from little more than a Disney theme park ride into a €1.8bn cashcow, who would bet €135m against Bruckheimer repeating his box office mojo come Memorial Day next May? Helping his cause is new studio chief, Rich Ross, recruited from Disney’s TV arm with a brief to leave no synergistic stone unturned across the franchise-crazed empire. You can be sure that the sequel genie is already out of the bottle.