Buy back value of Lehman minibonds remains uncertain

Wednesday, November 5, 2008
Issue 518, Page 4
Word count: 583
Published in: Macau Daily Times

By Poyi (Natalie) Leung

The Macao Monetary Authority (AMCM) did not yet have the Lehman minibonds buy back plan ready, but president Teng Lin Seng said yesterday that they would try to strive for a “better buy back value” than that of Hong Kong’s banks.

Present in the Legislative Assembly to respond to lawmakers Ng Kuok Cheong and Kwan Tsui Hang’s oral interpellation regarding solutions of Lehman Brothers structured investment products, AMCM president Teng Lin Seng said he predicted that “within a short time” local banks would contact Lehman minibonds investors to deal with financial settlements.

However, Mr Teng told reporters after the Assembly that neither the buy back plan nor the buy back value had been finalised among the local banks.

The monetary chief said representatives of Macau’s Lehman products distributors would attend the meeting of the Hong Kong Association of Banks tomorrow in which more details of Macau’s buy-back plan would be confirmed.

As some Lehman structured investment products were valued at zero in Hong Kong, Mr Teng did not give details of whether the same valuation would be given by banks in Macau, but added that the AMCM would analyse each investor’s background including “age, education level, financial condition and risk tolerance capability” in order to “negotiate with local banks for a better solution than Hong Kong’s”.

However, Mr Teng pointed out that the AMCM did not have any authority in ordering banks to buy back all minibonds in full original values or forcing them to compensate affected investors.

He said the valuation method had already determined and independent assessment of Lehman products’ market values had been started.

Although the AMCM chief said further details about the buy back plan could be confirmed after the meeting in Hong Kong tomorrow, there would be “a lot of local bank representatives attending” where the buy back value might not yet be able to be finalised on that day.

According to the AMCM statistics, as of November 3, 272 complaints in relation to Lehman Brothers minibonds were received. Of which, 173 had entered the stage of investigation which Mr Teng said involved all the five financial institutes that sold such investment products in Macau.

When asked whether any of the 173 cases showed signs of misleading by banks during sales process, Mr Teng did not give a direct response but said the authority needed to “listen to statements from both the banks and investors in a bid to settle the incident impartially and fairly”.

The Hong Kong newspapers reported yesterday that Bank of China Hong Kong Branch would buy back their Lehman investment products in “high rate or even full original sales value” if they found their staff had “misled or deceived customers during the sales process”.

In Macau if evidence was solid and financial institutes deserved to be punished, Mr Teng said the AMCM would handle the case according to administrative proceedings which could hand down a fine of 10,000 patacas to five million patacas.

Meanwhile, the monetary chief could not give a date of when the buy back plan would be made certain in Macau, and said it would take some time “to study different backgrounds of all investors and then integrate the data so that they can bargain with the banks for a more justified buy back value”.

“Macau distributors sold Lehman investment products entrusted from Hong Kong and thus to a certain extent we are in a passive role that we can’t fully dominate the time in finalising the plan,” Mr Teng added.

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