A capital lifeline?

Guaranteeing investors' capital with your own bonds has always been a convenient way for banks to borrow money from investors at the same time as offering them a cut in the upside of the chosen underlying in a structured note. Such fundraising is often seen as a positive consequence of the structured products business rather than a reason for it, but current market conditions could reverse this state of affairs. Surprisingly, some of the riskier credits are attracting the most interest. Peter Koh reports

"The importance of the structured products business' fundraising capacity for banks is very difficult to quantify," says Emmanuel Naim, head of equity structured products at Societe Generale in Paris. "I wouldn't say there has been a major shift into structured products because of their capital-raising capacity, but it is true that this is extremely advantageous for banks right now."

One of the attractions of using structured products as a funding source for banks is diversification. Raising