Statement of the Hong Kong Monetary Authority on the Report of the Legislative Council Subcommittee to Study Issues Arising from Lehman Brothers-related Minibonds and Structured Financial Products

The Hong Kong Monetary Authority (HKMA) has noted the publication of a report by the Legislative Council Subcommittee to Study Issues Arising from Lehman Brothers-related Minibonds and Structured Financial Products (LegCo Subcommittee).  The HKMA has also noted that a minority report has been prepared by a number of LegCo Subcommittee members. 

The HKMA has cooperated fully with the LegCo Subcommittee throughout the process over the past three and a half years.  Learning from past experience and having regard to evolving market conditions and practices, the HKMA has since September 2008 implemented a series of measures to enhance the regulation of sales of investment products by banks, including some of the recommended measures of the LegCo Subcommittee.  These measures have been operating effectively in the past few years.  The HKMA has also enhanced its supervisory framework with increased resources devoted to banking conduct supervision and enforcement so as to protect the interests of investors.

However, the report of the LegCo Subcommittee has not fully taken into account the information and representations submitted by the HKMA, in particular, the impact on investors in Hong Kong of the sudden and unexpected collapse of Lehman Brothers which led to the eruption of the once-in-a-century global financial crisis with unprecedented shocks globally, and the supervisory actions already taken by the HKMA prior to the collapse of Lehman Brothers. 

It should also be noted that the HKMA, together with the Securities and Futures Commission, has facilitated large scale settlement between banks and investors of Minibonds and structured financial products related to Lehman Brothers.  As a result of such settlement, the majority of investors have been able to recover a significant portion of the money they invested without the need to go through lengthy and costly legal processes governing civil litigation of that nature.

The HKMA will study the two reports carefully.  As market conditions and public expectation on investor protection will continue to evolve over time, the HKMA will regularly review and, as and when appropriate, introduce further measures to enhance the regulation of banks in order to protect the interests of investors. 

Hong Kong Monetary Authority
6 June 2012