Photo published in the International Herald Tribune
2
SATURDAY -SUNDAY, SEPTEMBER 26-27,2009 | 15 THE GLOBAL EDITION OF THE NEW YORK TIMES .... TOKYO BY MIKI TANIKAWA Forsomeo newhosestatedaimis tolead the global market for his product, Ta- dashi Yanai cuts an unassuming figure. He speaks softly about his passion for business but also about his firm belief that successful people will inevi tabl y make mistak es, and then learn from them. His autobiography, published in 200 3, is tit led ‘‘One Win and Nine Losses.’’ Mr. Yanai, 60, the founder and chief execut ive of the Japa nese company Fast Retailing, has big ambitions: to be the world’s largest purveyor of cheap yetchic cloth ingin thenext 10years. Fast Retailing owns Uniqlo, the so- called fast fashion chain whose square redlogowith whitecharact ersnow flies above 777 stores in Japan and 90 stores in China, Hong Kong, Sout h Kore a, Sing apore , Britain, Fra nce and the UnitedStates. It als o own s the Theory cloth ing bran d in the United States and two Fre nch bran ds, Compt oir des Coto n- niersand PrincesseTam-Tam. From its founding in 1963 as a family- runclothin g shop,anddespitea fewset- backs along the way, Fast Retailing has gener allylivedup toits name.Thecom- panyhas forec astthatsalesfor theyear through Aug. 31 rose 16 percent, to ¥680 billi on,or about$7. 4 billi on,whileprofits rose 20 perce nt, to ¥52 billion. Many analysts expect that the final numbers, to be announced Oct. 8, will beat the forecast. In a depressed market for retailers’ stocks, Fast Retailing shares have been buoyant, trading at a price-to-earnings rati oof 21.35.Thatperformancehaspro- pelledMr.Yan ai,the compan y’sbiggest shareholder, to the top of the current Forbes list of the richest people in Ja- pan,witha networthof $6.1billio n. Yet despite its best efforts to expand globally, Fast Retailing still generates about 90 percent of its sales in Japan. Mr. Yanai wants to change that. His 10- year goal is to achieve annual sales of more than ¥5 trillion — more than the combined sales of competitors like Gap Stores, H&M and Inditex, which owns theZarabrand. Fast Retailing’s latest overseas salvo will come Oct. 1 in Paris, with the open- ing of a Uniqlo flagship store on Rue Scribe — 2,000 square meters, or more than 21,000 square feet, of retail space just around the corner from the land- mark department stores Galeries Lafa- yett e andPrintemps. Even though cheap chic is thriving as consumers cut back, opening a flagship stor ein theworld’ sfashioncapitalcould be the definition of chutzpah. Mr. Yanai sees it as a natural extension of the bran d — andof hisbusinessstyle . ‘‘We have grown to this from a ¥1 bil- lion company in 1984, when we estab- lished our first Uniqlo shop,’’ Mr. Yanai sai din arecentinter viewin hisoffi cein Tok yo. ‘‘That is no less prepost erous than what we aim to achieve’’ in the next10 years . Most Uniqlo items go for just tens of dollars and rarely carry a retail price of more than $60, even for jacke ts and coats . Inwarehousel ikestores,Uniqlo ’s simply dressed salespeo ple stack up sweat shirts, turtlenecks and sweaters in vivid colors of all gradati ons, as if theyweredisplayin g crayo ns. To keep costs low and quality high, Uniq lomanufactu resinChina underthe watch ful eye of Japanese executives who are handpicked by Mr. Yanai and haveexperien cein text ilesand design . Jon Wright, retail industry analyst at Euromonitor International in London, said Fast Retailing would have a fair shotat sellin g wellin Europ e. ‘‘Uniq lo’ s pric ing str uctu re is low enough to enable it to compete well with H&Mand Zara, ’’Mr. Wrightsaid.‘‘It has a wider range of prices, which should make it better able to attract consumers whoare tradin gdown fromhigher-priced brands into the midmarket segment, not justpeople lookingfor bargain s. ’’ Building its business globally will be crucial if Fast Retailing is to achieve its ambitious goals. Like every big Japa- nese consumer prod ucts company , it faces a deadline: Japan’s population is agin g,andits yout hpopulati onisshrink- ing .At thesametime,thefor cesofglob- aliz atio n are brin ging multi nati onal competitorsinto the Japanesemarket. ‘‘Companiesthatsell onlyin Japanwill eventually not be able to sell even in Ja- pan,’’ Mr. Yanai, who sprinkles the word ‘‘globaliz ation’’liberallyinto his conver- sation and public remarks, said recently in a news conference. ‘‘Corporation s havetogo glob alin orde rto surv ive. ’’ Like most companies that sell to the youth market, Uniqlo gets the word out aboutanew storeor anew collec tionvia a variety of media, including distribut- ing leaflets in newsp apers . But its stro ngestsellusuallyis wordof mouth . ‘‘We have been around for thre e years, and customers throughout New PARIS BY MATTHEW SALTMARSH Twenty-t wo large banks in Europe may have accumulated credit losses of close to¤400bill ionforthisyearand next,ac- cordi ng to offici als who have seen a draft of conclusions of ‘‘stress tests’’ condu ctedby Euro peanregulato rs. At a meeting next Thursday and Fri- dayin Swede n,EuropeanUnionfinan ce minis ters are plann ing to publi sh at least one headline figure on banki ng health based on the results of the tests, theofficials,whowere notauthori zedto speak publicly,said Friday. E.U. finance ministers are also plan- ning soon to initi ate a stress test for European insurance companies, with the results to be assessed in the spring, theofficialssaid. The bank tests in Europe wer e conducted by the Committee of Euro- pean Banking Supervisors, or C.E.B.S., a pan-E.U. regulators’ panel based in Londo n,which wasassigne d thematter bygovernmen ts.The commi tteedid not replyFrida y torequestsforcomment. The figure of almost ¤400 billion, or $580billio n,coversassume d bankcredit lossesratherthan totalbad assets,under a ‘‘negative’’ scenario in which macro- economic forecasts, like growth in gross domestic product for this year and next, arelowerthanthe fore cast s ofthe Euro - peanCommission, theofficials said. Other scenarios and elements of the testi ngprocesswillnotbe relea sedpub- licly ,accordingtothe offici als. Unlike a similar exercise carried out in the United States this year, the re- leaseof theEuropeanresul tswill notin- clude assessments of further action re- quired by indiv idual banks to bolst er theirbalanc e sheets. U.S. regulators released their stress test results in May, saying that 9 of the 19 larg est U.S.- based banks were ad- equately protected, while the other 10 were ordered to raise a combined $75 billio n as a buffer agains t poten tial loss es.The U. S.processaddedpressure onEuropeanstodisclosetheirresults . In a brief statement in May, the com- mittee confirmed that it was ‘‘carrying outan E.U.-wi de forward-lo okingstres s testing exercise on the aggregate bank- ing sys te m’’ based on c om mo n guidel ines and scenarios. It said it wouldnotidentifyindivid ualbanksthat might need recapitalization, and that it was the responsibility of national gov- ernmentsto namesuch bank s. ‘‘Intermsof thebettervisibi lityof the fiscalcostsof thebailouts , itwill be pos- itive to publish the results,’’ said Hans- Joach imDübel,a banki ngexpertat Fin- polconsult in Berlin. ‘‘But we know that theproblemis withcertainbanks , anda globa l figure doesn ’thelp uswith that. ’’ Peer Steinbrück, the German finance minister , had previous ly signaled his re- luctance to release findings of stress tests.Onereason,accordingto MrDübel, is that German politician s are worried about the extent of the troubles at the GermanLandesbanken , orstate lenders. One E.U. regulator , who had a central role, said Frida y that the exercise of conducting the stress tests — a first on this scale in Europe — had been very positive. ‘‘It was a big learning process,’’ said the official, who was unaut horiz ed to speak publicly. ‘‘But we now know bet- ter how to do this in future. There is a centralizedcommand.’’ The InternationalMonetaryFund will publish its own forecast of bank health Wednesday as part of its Financial Sta- bilit y Revie w. The fund estimat ed in AprilthatEuropea nbanksstill required $375 billion in capital to cover losses, compar ed with $275 billion for U.S. lenders.That forec astcausedsomecon- sternation among European officials, whohad notbeeninforme dof itsrelease andwereunclearon themethodol ogy . The stresstestsfor Europeaninsurers will be condu cted by the Frankf urt- basedcommittee ofEuropean insurance and occupational pensions supervisors, accordingto E.U.officials. With their more conservative invest- ment strate gies, insure rs — with the nota ble exception of the U.S. giant AmericanInternationalGroup —gener- allysteer edclearof themosttoxicstruc- turedprod uctsthatbroughtanumberof West ernbanksto theirkneeslastyear. abou tthreemoreweeksto plugtheleak. The platform is locat ed above the Montara oil field, about 250 kilometers, or 155 miles, northwest of the Truscott Air Base in the remote Kimberley re- gionof thecountry. The leaking well head is owned by the nationa lpetroleumcompany ofThailand, PTT Exploration and Production, one of the many energy firms that have set up operations in western Australia to feed Asia’sgrowingappetitefor oiland gas. Inthefirsthal f ofthisyear ,morethan 50 wells were drilled in the tropical wa- ters off weste rn Australia , adding to hundreds of other recent projects. Last month, the government gave Chevron thegreenlightto expan d itsexplora tion of the massi ve Gorgon gas field, a $40 billion project that was opposed by SYDNEY BY MERAIAH FOLEY Visi tors hoping to peek at the exoti c marine life in Australia usually make a beeline for the Great Barrier Reef. But conservationists say that an equally re- mark able,but lesse r known , marin e en- viro nment is under threat from the booming oil and gas exploration taking place among the reefs and atolls off the Australiannorthwest coast. A damaged oil well in the region has Joe Nocera TALKING BUSINESS Good morning, Nicolas.* Did you sleep well, Angela? Wasn’t that a good din- ner last night, Gordon? Pittsburgh is such a great city; I’m so glad we’re holding our G-20 meeting here. It was Michelle’s idea, you know. I think she would have lobbied for Pittsburgh even if the city hadn’t swung for me in the election. (Laughter.) O.K., maybe not. So let’s get down to business. We made great progress on Thursday, didn’t we? Jintao, you agreed to push for more domestic demand in your Chinese economy. My good friends in Europe agreed to seek more invest- ment from the rest of the world, and everybody agreed to be less dependent on U.S. consumers. We even agreed to check up on each other to see if we’re all doing what we said we would do. Wow. Are summits always this pro- ductive? (More laughter.) I didn’t think so. Now we’ve got to tackle the subject we’ve all been avoiding. What are we going to do about capital requirements for the banking system? Please, Nicolas, don’t groan. Tim Geithner, my Treasury secretary, keeps telling me that strengthening capital requirements for the banking system is the single most important factor in ensuring that we never have a repeat of last year’s financial crisis. He’s got me convinced. When I was run- ning for president, I don’t think I even knew that banks had capital requirements. I certainly didn’t know the difference between Tier 1 and Tier 2 capital. I thought Basel was a city in Switzerland, and not shorthand for a complex international system to regulate bank capital requirements. ButI sureknowaboutthem now. Theyhelpedcre atethemesswegotin- tolast year. Andnow,becauseour bank s andmostof yourbanksuse dif- feren t capit alstandar ds,it isgoingto be rea llytou ghto getuson thesame pag e. Butwehavetotry. I’m sure youall saw the prop osalfor tougher capitalrequirements that Tim and his folks at T reasury issueda few weeks ago . I know youdon’t allagree with his proposals, but Ithink they make a ton o f sense. AndI am very re- luctant to compromise on Tim’s plan, because I think it offers the best chance to make sure that the banking sy stem survives the next big financialcrisis. For instance, Tim says that the qual- ity of Tier 1 capital has to be vastly im- proved. Who knew that not all capital is the same? (Tier 2 capital isn’t worth talking about. ‘‘It’s the bank equivalent of your brother-in-law saying he’ll lend you $5 if you get in trouble,’’ somebody told me the other day.) The way Tim explained it to me, the best kind of capital is the kind that is tangible and never has to be paid back — the kind that comes from either issu- ing stock, or from putting aside re- tained earnings. That is the kind of cap- ital bankers can use to plug holes when their banks report losses, or they have to write down assets. But one of the things I’ve learned is that the rules al- low other vehicles to be classified as Tier 1 ‘‘capital.’’ Preferred stock, for in- stance. Or hybrid forms of debt. Or even — and I hear you do this a lot in Europe — certain deferred taxes. But when you run into trouble, you can’t use deferred taxes to replace as- sets that have just been written down. And you can’t use preferred stock either, because ultimately, that money you’ve raised by issuing preferred stock has to be paid back. In other words, it’s not the kind of capital that will act as a safeguard in times of trouble. And that’s the whole point of capital. ThesecondthingTim’sbeentelling meis tha tbanksnee d tohavemor e capit al.Last year, asbankswrote down theirbadloans,they became solow on capit althat someof thereweretechni- callyinsol vent . Gordo n,isn’tthat why younowowntheRoyalBankofScot - lan d?It’swhywehadto sho reup our bank s withtaxpay ermoney — they hadn ’tput enoug h capit alaside tocover allthe loss esfrom theirtoxicsecurit ies. Right now the rules say banks must have, at a minimum, Tier 1 capital that amounts to 4 percent of their assets. Tim hasn’t unveiled a new number yet, I know you don’t all agree with Tim’s proposals, but I think they make a ton of sense. Imagining wh at Obama coul d’ ve said comes at a price. They say the Montara oil spill is merely a sign of things to comeunlessgreaterprotect ionsare ex- tende d tovaststretchesoftropicalreefs off northwesternAustralia. ‘‘It’s a classic conflict between devel- opment and the ecological values of the region, ’’ said John Carey, manager of the Kimberley Conservation Program with the Pew Environment Group. ‘‘We need to get the balance right. But the balan ceat themomentis thatlessthan1 and flood the area with heavy mud to stan chthe flow. But such highly speciali zed equip- mentisnoteasyto comeby.Ittookthree weeks to tow the rig from Singapore, andPTThassaidit wil ltakeat leastan- otherthreeweeksto plugthe leak. The company has declined to esti- mate how much oil has spilled into the sea, saying it is too dangerous to take accurate measurements from the dam- aged rig. Both PTT and Austral ian marit ime officials, who are helpin g to clean up the spill, say that the slick is around 40 kilometers wide and 140 kilo- meter slong, butthat therate ofleakage appear s tobe slowing. Earlier this month, the federal envir- onmen tminister ,PeterGarrett ,said the government believed that around 300 Foun der of Fast Retailing aims to be the king of cheap chic in 10 years A J apanese merchant in a hur ry UNIQLO, PAGE 16 ‘‘Corporations have to go global in order to survive.’’ TOSHIYUKI AIZAWA/REUTE RS ERIC PIERMONT/AGENCE FRANCE-PRESSE Fast Retailing is scheduled to open a 2,000-square-meter Uniqlo store Thursday in Paris, top and above left. Tadashi Yanai, above right, is founder and chief executive of the company . MAILE CANNON/INTERNATIONAL HERALD TRIBUNE After U.S. ‘stress tests, ’ regulators from E.U. try to estimate credit losses Business Eur ope takes its turn in assessing ban k health ‘‘W e know that the problem is with certain banks, and a global figure doesn’t help us with that.’’ A ustr al ia n oi l sp il l rene ws de ve lo pmen t de ba te ‘‘The Timor Sea is literally a rich soup of marine life, and now we have a massive oil slick sitting on the surface.’’ Frag ile marine systems need better protection, conservationists say
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Transcript of Photo published in the International Herald Tribune
8/14/2019 Photo published in the International Herald Tribune
http://slidepdf.com/reader/full/photo-published-in-the-international-herald-tribune 1/1
SATURDAY-SUNDAY, SEPTEMBER 26-27,2009 | 15THE GLOBAL EDITION OF THE NEW YORK TIMES
. . . .
TOKYO
BY MIKI TANIKAWA
Forsomeonewhosestatedaimis toleadthe global market for his product, Ta-dashi Yanai cuts an unassuming figure.He speaks softly about his passion for
business but also about his firm belief that successful people will inevitablymake mistakes, and then learn fromthem. His autobiography, published in2003, is titled ‘‘One Win and NineLosses.’’
Mr. Yanai, 60, the founder and chief executive of the Japanese companyFast Retailing, has big ambitions: to bethe world’s largest purveyor of cheapyetchic clothingin thenext 10years.
Fast Retailing owns Uniqlo, the so-called fast fashion chain whose squareredlogowith whitecharactersnow fliesabove 777 stores in Japan and 90 storesin China, Hong Kong, South Korea,Singapore, Britain, France and theUnitedStates.
It also owns the Theory clothingbrand in the United States and twoFrench brands, Comptoir des Coton-
niersand PrincesseTam-Tam.From its founding in 1963 as a family-
runclothing shop,anddespitea fewset-backs along the way, Fast Retailing hasgenerallylivedup toits name.Thecom-panyhas forecastthatsalesfor theyearthrough Aug. 31 rose 16 percent, to ¥680billion,or about$7.4 billion,whileprofitsrose 20 percent, to ¥52 billion. Manyanalysts expect that the final numbers,to be announced Oct. 8, will beat theforecast.
In a depressed market for retailers’stocks, Fast Retailing shares have been
buoyant, trading at a price-to-earningsratioof 21.35.Thatperformancehaspro-pelledMr.Yanai,the company’sbiggestshareholder, to the top of the current
Forbes list of the richest people in Ja-pan,witha networthof $6.1billion.
Yet despite its best efforts to expandglobally, Fast Retailing still generatesabout 90 percent of its sales in Japan.Mr. Yanai wants to change that. His 10-year goal is to achieve annual sales of more than ¥5 trillion — more than thecombined sales of competitors like GapStores, H&M and Inditex, which ownstheZarabrand.
Fast Retailing’s latest overseas salvo
will come Oct. 1 in Paris, with the open-ing of a Uniqlo flagship store on RueScribe — 2,000 square meters, or morethan 21,000 square feet, of retail space
just around the corner from the land-mark department stores Galeries Lafa-yette andPrintemps.
Even though cheap chic is thriving asconsumers cut back, opening a flagshipstorein theworld’sfashioncapitalcouldbe the definition of chutzpah. Mr. Yanaisees it as a natural extension of thebrand — andof hisbusinessstyle.
‘‘We have grown to this from a ¥1 bil-
lion company in 1984, when we estab-lished our first Uniqlo shop,’’ Mr. Yanaisaidin arecentinterviewin hisofficeinTokyo. ‘‘That is no less preposterousthan what we aim to achieve’’ in thenext10 years.
Most Uniqlo items go for just tens of dollars and rarely carry a retail price of more than $60, even for jackets andcoats. Inwarehouselikestores,Uniqlo’ssimply dressed salespeople stack upsweat shirts, turtlenecks and sweatersin vivid colors of all gradations, as if theyweredisplaying crayons.
To keep costs low and quality high,UniqlomanufacturesinChina underthewatchful eye of Japanese executiveswho are handpicked by Mr. Yanai andhaveexperiencein textilesand design.
Jon Wright, retail industry analyst atEuromonitor International in London,
said Fast Retailing would have a fairshotat selling wellin Europe.
‘‘Uniqlo’s pricing structure is lowenough to enable it to compete well withH&Mand Zara,’’Mr. Wrightsaid.‘‘It hasa wider range of prices, which shouldmake it better able to attract consumerswhoare tradingdown fromhigher-pricedbrands into the midmarket segment, not
justpeople lookingfor bargains.’’Building its business globally will be
crucial if Fast Retailing is to achieve itsambitious goals. Like every big Japa-nese consumer products company, it
faces a deadline: Japan’s population isaging,andits youthpopulationisshrink-ing.At thesametime,theforcesofglob-alization are bringing multinationalcompetitorsinto the Japanesemarket.
‘‘Companiesthatsell onlyin Japanwilleventually not be able to sell even in Ja-pan,’’ Mr. Yanai, who sprinkles the word‘‘globalization’’liberallyinto his conver-sation and public remarks, said recentlyin a news conference. ‘‘Corporationshavetogo globalin orderto survive.’’
Like most companies that sell to theyouth market, Uniqlo gets the word outaboutanew storeor anew collectionviaa variety of media, including distribut-ing leaflets in newspapers. But itsstrongestsellusuallyis wordof mouth.
‘‘We have been around for threeyears, and customers throughout New
PARIS
BY MATTHEW SALTMARSH
Twenty-two large banks in Europe mayhave accumulated credit losses of closeto¤400billionforthisyearand next,ac-cording to officials who have seen adraft of conclusions of ‘‘stress tests’’conductedby Europeanregulators.
At a meeting next Thursday and Fri-dayin Sweden,EuropeanUnionfinanceministers are planning to publish atleast one headline figure on bankinghealth based on the results of the tests,
theofficials,whowere notauthorizedtospeak publicly,said Friday.
E.U. finance ministers are also plan-ning soon to initiate a stress test forEuropean insurance companies, withthe results to be assessed in the spring,theofficialssaid.
The bank tests in Europe wereconducted by the Committee of Euro-pean Banking Supervisors, or C.E.B.S.,a pan-E.U. regulators’ panel based inLondon,which wasassigned thematterbygovernments.The committeedid notreplyFriday torequestsforcomment.
The figure of almost ¤400 billion, or$580billion,coversassumed bankcreditlossesratherthan totalbad assets,undera ‘‘negative’’ scenario in which macro-economic forecasts, like growth in grossdomestic product for this year and next,arelowerthanthe forecasts ofthe Euro-peanCommission, theofficials said.
Other scenarios and elements of thetestingprocesswillnotbe releasedpub-licly,accordingtothe officials.
Unlike a similar exercise carried outin the United States this year, the re-leaseof theEuropeanresultswill notin-
clude assessments of further action re-quired by individual banks to bolstertheirbalance sheets.
U.S. regulators released their stresstest results in May, saying that 9 of the19 largest U.S.-based banks were ad-equately protected, while the other 10were ordered to raise a combined $75billion as a buffer against potentiallosses.The U.S.processaddedpressureonEuropeanstodisclosetheirresults.
In a brief statement in May, the com-mittee confirmed that it was ‘‘carryingoutan E.U.-wide forward-lookingstresstesting exercise on the aggregate bank-ing system’’ based on commonguidelines and scenarios. It said it
wouldnotidentifyindividualbanksthatmight need recapitalization, and that itwas the responsibility of national gov-
ernmentsto namesuch banks.‘‘Intermsof thebettervisibilityof the
fiscalcostsof thebailouts, itwill be pos-itive to publish the results,’’ said Hans-JoachimDübel,a bankingexpertat Fin-polconsult in Berlin. ‘‘But we know thattheproblemis withcertainbanks, andaglobal figure doesn’thelp uswith that.’’
Peer Steinbrück, the German financeminister, had previously signaled his re-luctance to release findings of stresstests.Onereason,accordingto MrDübel,is that German politicians are worriedabout the extent of the troubles at theGermanLandesbanken, orstate lenders.
One E.U. regulator, who had a centralrole, said Friday that the exercise of conducting the stress tests — a first onthis scale in Europe — had been verypositive.
‘‘It was a big learning process,’’ saidthe official, who was unauthorized tospeak publicly. ‘‘But we now know bet-ter how to do this in future. There is acentralizedcommand.’’
The InternationalMonetaryFund willpublish its own forecast of bank healthWednesday as part of its Financial Sta-bility Review. The fund estimated inAprilthatEuropeanbanksstill required$375 billion in capital to cover losses,compared with $275 billion for U.S.lenders.That forecastcausedsomecon-sternation among European officials,whohad notbeeninformedof itsreleaseandwereunclearon themethodology.
The stresstestsfor Europeaninsurerswill be conducted by the Frankfurt-basedcommittee ofEuropean insuranceand occupational pensions supervisors,accordingto E.U.officials.
With their more conservative invest-ment strategies, insurers — with thenotable exception of the U.S. giantAmericanInternationalGroup — gener-allysteeredclearof themosttoxicstruc-turedproductsthatbroughtanumberof Westernbanksto theirkneeslastyear.
But unlike banks, many insurers arenow suffering from the record-low levelofinterestratesin themajoreconomies.This had dented their returns from in-vestments like bonds, while they havefixed obligations in the form of policypayouts.
aboutthreemoreweeksto plugtheleak.The platform is located above the
Montara oil field, about 250 kilometers,or 155 miles, northwest of the TruscottAir Base in the remote Kimberley re-gionof thecountry.
The leaking well head is owned by thenationalpetroleumcompany ofThailand,PTT Exploration and Production, one of the many energy firms that have set upoperations in western Australia to feedAsia’sgrowingappetitefor oiland gas.
Inthefirsthalf ofthisyear,morethan50 wells were drilled in the tropical wa-ters off western Australia, adding tohundreds of other recent projects. Lastmonth, the government gave Chevronthegreenlightto expand itsexplorationof the massive Gorgon gas field, a $40billion project that was opposed by con-servationistsbecauseof itspotentialen-vironmentalimpacts.
Economists credit the booming tradein petroleum and other mineral re-sources with helping Australia escapethebruntof theGreatRecession,buten-vironmentalists say this prosperity
SYDNEY
BY MERAIAH FOLEY
Visitors hoping to peek at the exoticmarine life in Australia usually make abeeline for the Great Barrier Reef. Butconservationists say that an equally re-markable,but lesser known, marine en-vironment is under threat from thebooming oil and gas exploration takingplace among the reefs and atolls off theAustraliannorthwest coast.
A damaged oil well in the region hasbeen spewing thousands of liters of crude, gas and condensate into theTimor SeasinceAug.21, whena blowoutforced the evacuation of all 69 workersonboard theplatform.Emergencycrewshave been working overtime to containthe spill, but officials say it could take
Joe
Nocera
TALKING BUSINESS
Good morning, Nicolas.* Did you sleepwell, Angela? Wasn’t that a good din-ner last night, Gordon? Pittsburgh issuch a great city; I’m so glad we’reholding our G-20 meeting here. It wasMichelle’s idea, you know. I think shewould have lobbied for Pittsburgh evenif the city hadn’t swung for me in theelection. (Laughter.) O.K., maybe not.
So let’s get down to business. Wemade great progress on Thursday,didn’t we? Jintao, you agreed to pushfor more domestic demand in yourChinese economy. My good friends inEurope agreed to seek more invest-ment from the rest of the world, andeverybody agreed to be less dependenton U.S. consumers. We even agreed tocheck up on each other to see if we’reall doing what we said we would do.
Wow. Are summits always this pro-ductive? (More laughter.) I didn’t thinkso. Now we’ve got to tackle the subjectwe’ve all been avoiding. What are wegoing to do about capital requirementsfor the banking system?
Please, Nicolas, don’t groan. TimGeithner, my Treasury secretary,keeps telling me that strengtheningcapital requirements for the banking
system is the singlemost importantfactor in ensuringthat we never have arepeat of last year’sfinancial crisis. He’sgot me convinced.
When I was run-ning for president, Idon’t think I evenknew that banks had
capital requirements. I certainly didn’tknow the difference between Tier 1 andTier 2 capital. I thought Basel was acity in Switzerland, and not shorthandfor a complex international system toregulate bank capital requirements.
ButI sureknowaboutthem now.Theyhelpedcreatethemesswegotin-tolast year. Andnow,becauseourbanks andmostof yourbanksuse dif-ferent capitalstandards,it isgoingto bereallytoughto getuson thesame page.Butwehavetotry.
I’m sure youall saw the proposalfortougher capitalrequirements that Timand his folks at Treasury issueda fewweeks ago. I know youdon’t allagreewith his proposals, but Ithink theymake a ton of sense. AndI am very re-luctant to compromise on Tim’s plan,because I think it offers the best chanceto make sure that the banking systemsurvives the next big financialcrisis.
For instance, Tim says that the qual-
ity of Tier 1 capital has to be vastly im-proved. Who knew that not all capital isthe same? (Tier 2 capital isn’t worthtalking about. ‘‘It’s the bank equivalentof your brother-in-law saying he’ll lendyou $5 if you get in trouble,’’ somebodytold me the other day.)
The way Tim explained it to me, thebest kind of capital is the kind that istangible and never has to be paid back— the kind that comes from either issu-ing stock, or from putting aside re-tained earnings. That is the kind of cap-ital bankers can use to plug holes whentheir banks report losses, or they haveto write down assets. But one of thethings I’ve learned is that the rules al-low other vehicles to be classified asTier 1 ‘‘capital.’’ Preferred stock, for in-stance. Or hybrid forms of debt. Oreven — and I hear you do this a lot inEurope — certain deferred taxes.
But when you run into trouble, youcan’t use deferred taxes to replace as-sets that have just been written down.And you can’t use preferred stockeither, because ultimately, that moneyyou’ve raised by issuing preferredstock has to be paid back.
In other words, it’s not the kind of capital that will act as a safeguard intimes of trouble. And that’s the wholepoint of capital.
ThesecondthingTim’sbeentellingmeis thatbanksneed tohavemorecapital.Last year, asbankswrote downtheirbadloans,they became solow oncapitalthat someof thereweretechni-callyinsolvent. Gordon,isn’tthat whyyounowowntheRoyalBankofScot-land?It’swhywehadto shoreup ourbanks withtaxpayermoney — theyhadn’tput enough capitalaside tocoverallthe lossesfrom theirtoxicsecurities.
Right now the rules say banks musthave, at a minimum, Tier 1 capital thatamounts to 4 percent of their assets.Tim hasn’t unveiled a new number yet,
I know youdon’t all agreewith Tim’sproposals, butI think they
make a ton of sense.
Imagining whatObama
could’ve said
comes at a price. They say the Montaraoil spill is merely a sign of things tocomeunlessgreaterprotectionsare ex-tended tovaststretchesoftropicalreefsoff northwesternAustralia.
‘‘It’s a classic conflict between devel-opment and the ecological values of theregion,’’ said John Carey, manager of the Kimberley Conservation Programwith the Pew Environment Group. ‘‘Weneed to get the balance right. But the
balanceat themomentis thatlessthan1percent of this globally significant areaisunder anyform ofprotection.’’
PTTExplorationand Productionsaidit was still investigating what causedthe blowout. To stop the spill, the com-pany has hired a specialist rig to drilldown 2.4 kilometers below the seabed
and flood the area with heavy mud tostanchthe flow.
But such highly specialized equip-mentisnoteasyto comeby.Ittookthreeweeks to tow the rig from Singapore,andPTThassaidit willtakeat leastan-otherthreeweeksto plugthe leak.
The company has declined to esti-mate how much oil has spilled into thesea, saying it is too dangerous to takeaccurate measurements from the dam-aged rig. Both PTT and Australianmaritime officials, who are helping toclean up the spill, say that the slick isaround 40 kilometers wide and 140 kilo-meterslong, butthat therate ofleakageappears tobe slowing.
Earlier this month, the federal envir-onmentminister,PeterGarrett,said thegovernment believed that around 300barrelsto 400barrelsof oilwereleakinginto the sea each day. That amounts tomore than 1.7 million liters, or 450,000gallons, of oil (and unknown quantitiesof gas and condensate) since the blow-outbegan.
Founder of Fast Retailing aims to be the king of cheap chic in 10 years
A Japanese merchant in a hurry
UNIQLO, PAGE 16
NOCERA, PAGE 16
‘‘Corporations have to goglobal in order to survive.’’
TOSHIYUKI AIZAWA/REUTERS
ERIC PIERMONT/AGENCE FRANCE-PRESSE
Fast Retailing is scheduled to open a 2,000-square-meter Uniqlo store Thursday in Paris, top and above left. Tadashi Yanai, above right, is founder and chief executive of the company.
MAILE CANNON/INTERNATIONAL HERALD TRIBUNE
After U.S. ‘stress tests,’regulators from E.U. try to estimate credit losses
* I’m not saying this is what PresidentBarack Obama said Friday morning when he met with his fellow world lead-ers at the Group of 20 summit meeting inPittsburgh.Buthe shouldhave.
BusinessEurope takesits turn in
assessingbank health
‘‘We know that the problemis with certain banks,and a global figure doesn’thelp us with that.’’
AUSTRALIA, PAGE 17
Australian oil spill renews development debate
‘‘The Timor Sea is literally a rich soup of marine life, andnow we have a massive oilslick sitting on the surface.’’
Fragile marine systemsneed better protection,conservationists say
