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Mitsubishi UFJ Financial Group (MUFG), Japan’s largest bank, has agreed to buy up to 20% of Morgan Stanley and establish a strategic alliance with the U.S. bank.

The investment, which is estimated to be worth as much as US$8.5 billion, would be based on Morgan Stanley’s book value upon completion of satisfactory due diligence.

In addition to further strengthening Morgan Stanley’s capital position, the companies say the alliance will benefit both of them by providing each with a strategic partner as they seek to grow globally.

“This strategic alliance with Mitsubishi UFJ can put Morgan Stanley in an even stronger position as we look to realize the opportunities we see in the rapidly changing marketplace,” says John Mack, Morgan Stanley’s chairman and CEO.

The announcement comes just a day after Morgan Stanley and Goldman Sachs were granted approval by the U.S. Federal Reserve Board of Governors to become federal bank holding companies.

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That decision will allow both of them to take deposits, which will give them a more stable source of funding but subject them to more regulation.

Shares of Morgan and Goldman plunged last week following Lehman Brothers’ bankruptcy, but bounced back after the U.S. government took steps to come up with a solution to end the credit crisis.

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Northern Trust Outlines Lehman Exposure

Northern Trust says it has no outstanding loans to Lehman Brothers and it does not hold any Lehman securities in its balance sheet investment portfolio.

The company’s money market mutual funds, used primarily by institutional and individual investors, also have no exposure to Lehman.

“The funds continue to invest in high quality, short duration securities, and fund shareholders continue to have full access to their investments,” says a statement. Last week, Great-West Lifeco’s Putnam Investments closed its institutional money market fund because of redemption pressures.

Commingled fixed income funds, managed almost exclusively on behalf of institutional clients, hold approximately US$821 million in Lehman short- and long-term fixed income securities. These represent less than two-tenths of 1% of total short- and long-term fixed income investments managed by Northern Trust on behalf of clients.

Regarding exposure to Lehman equity securities, client funds managed by Northern Trust held approximately seven million shares of common stock at the time of its bankruptcy filing. These funds were managed primarily under investment mandates designed to replicate indices that included Lehman as a component. Subsequent to Lehman’s bankruptcy and removal from these indices, this position has been reduced to less than 300,000 shares.

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Currency Fluctuations Affect Compensation Programs

Most multinational organizations have not implemented solutions for mitigating the impact of currency fluctuations on current compensation programs for overseas employees, according to a survey.

Mercer’s Impact of Weakening U.S. Dollar on Compensation in Multinational Companies SnapShot Survey finds that 47% of responding multinational companies say the depreciating value of the U.S. dollar has had a moderate to significant impact on their compensation programs.

Equity-based long-term incentive plans, base salary and global mobility policies are the compensation components most impacted by currency fluctuations, specifically the declining value of the greenback.

Significantly, the majority of respondents (70%) do not use U.S. pay levels and dollar parity as a reference when determining pay rates for non-U.S.-based jobs.

“Too great a focus on U.S. pay levels and dollar parity may result in executive pay that is no longer competitive in the changing global market,” says Laurent Papaix, a principal at Mercer. “Most companies use local market peer groups for determining pay for non-U.S.-based executives.”

To read the report on Mercer’s website, click here.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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