HK banks unveil final resolution on Lehman minibonds

HK banks unveil final resolution on Lehman minibonds

HONG KONG, March 27 (Xinhua) -- Hong Kong's Association of Banks announced Sunday the 16 Hong Kong distributing banks of the so-called "minibonds" issued by Lehman Brothers agreed on a final resolution to buy back the products.

According to association Chairman He Guangbei, with the newly- added ex-Gratia Payment, eligible investors could have up to 96.5 percent of their initial investment returned, two and half years after the issuer of the financial product went bust.

Hong Kong's sole public service broadcaster RTHK on Sunday cited the association as saying that it's estimated over 30,000 HK investors are involved in the matter and the face value of these minibonds now stands at 13 billion HK dollars.

Considering the legal uncertainties still surrounding the matter, the offers in the resolution were "the best the banks could get for their clients," said Chairman He.

The Hong Kong government and the city's financial regulatory bodies welcome the resolution.

A government spokesman said the government is pleased with the high rate of recovery in the value of the minibond collateral and "we welcome the final resolution for the vast majority of the minibond noteholders and ex-Gratia Payment as a gesture of goodwill by the distributing banks."

In a release by the Security and Futures Commission, Commission CEO Martin Wheatley said the SFC acknowledges the additional voluntary payments by the banks and their continuing support for the Trustee which will further bolster the market's confidence in Hong Kong's financial institutions following the global financial crisis.

Meanwhile, Hong Kong Monetary Authority's Deputy Chief Executive Arthur Yuen believed "it is an important development which not only allows investors to avoid lengthy litigation and potentially costly fees and legal uncertainty, but also represents the concerted efforts among regulators, the participating banks and the relevant investors to recover the invested amount as far as practicable."

Lehman Brothers sold innocuously labeled minibonds, which were in fact complex derivatives, in Hong Kong region, Taiwan region and Singapore before it collapsed in September, 2008.

Disgruntled minibond investors in Hong Kong have taken to the street several times after the bank filed for bankruptcy. They complained that both regulators and distributing banks failed to inform them of the risks involved.