> Hong Kong
DBS first bank to repay bonds
By Lillian Liu (HK Edition)
Updated: 2008-10-10 07:36

 

About 70 investors who own Lehman Brothers-related products sold by DBS meet with DBS representatives yesterday. The bank said it will redeem the products sold by the bank. China Daily

DBS said it will redeem 70 investors' Lehman Brothers-related products sold by the bank, making it the first financial institution in Hong Kong to compensate investors in response to the government's pledge to help the bond holders recover some losses quickly.

Some 21 banks in Hong Kong, according to the Hong Kong Monetary Authority (HKMA), have sold minibonds and similar products backed by Lehman Brothers, which was the fourth-largest investment bank in the US until its collapse last month.

A spokeswoman at DBS said the bank is only responsible for the structural bonds, while other bonds related to Lehman Brothers were issued by another firm.

She said the bank has designated accounting firm KPMG to revalue the products to be bought back and did not rule out the possibility that some bond buyers will be totally refunded.

Analysts said DBS set a good example for other banks having issued Lehman Brothers-related products, but noted that it may be a while before investors actually receive their compensation.

Tens of thousands of Hong Kong people invested a total of HK$15.6 billion in the Lehman Brothers-backed derivatives, and they all face substantial losses.

The number of complaints concerning Lehman Brothers-related products has increased sharply to 7,730 from 5,500, and will grow further, the HKMA said yesterday. The authority has opened an investigation into whether the banks misled investors into buying them, it said.

"But we cannot comment on how long it will take to investigate the problems, because it depends on the capacity of the investigation team and availability of information provided," HKMA Executive Director Raymond Li told reporters at a press conference yesterday.

Y K Choi, deputy chief executive of the HKMA, said that to avoid similar cases in the future, the HKMA - the city's de facto central bank - is studying which risky financial products can be sold to retail investors and which should not be.

Among the total complaints received by HKMA, 6,012 cases are in the initial processing phase, while 1,476 cases require verification, and 242 complaints have been put in assessment for further action.

Li said investors complained they were misled into thinking they were buying a form of corporate bonds and were unaware until recently that the bonds were guaranteed by troubled Lehman Brothers.

They accused the banks of not fully disclosing the risks involved.

Some minibonds consist of high-risk derivatives such as synthetic collateralized debt obligations and credit default swaps.

(HK Edition 10/10/2008 page2)