Bank issued no minibonds alert

DBS Bank issued no minibonds alert to cutomers and others banks that sold Constellation Notes from DBS

Lawmakers want to summon a staff member of DBS Bank, who decided in March 2008 not to inform its customers of a higher product risk rating on all credit-linked notes.

They asked that the person be identified after Amy Yip Yok-tak, chief executive of DBS Bank (Hong Kong), told them the bank had not formally alerted its customers in writing of a request by the Hong Kong Monetary Authority to increase the risk rating of the notes from about two to five.

But she said there had been discussions about product risks between its sales staff and customers, but agreed to find out who made the decision not to alert customers.


Testifying for the third time before the Legislative Council subcommittee investigating the Lehman Brothers minibond debacle, Yip said the indicative price best represented the risk of an investment product since the price could fluctuate wildly without any change to the risk rating.

Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman when the Wall Street giant went bankrupt in September 2008.

Minibonds are not corporate bonds but high-risk, credit-linked derivatives. They are marketed as proxy investments in well-known companies.

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24 Apr 2010