Joseph Yam role in Lehman Minibonds saga

雷曼苦主大聯盟 - 雷曼苦主大聯盟, Alliance of Lehman Brothers Victims - 媒體報導


Joseph Yam Chi-kwong may once have been the world's highest paid central banker, but that wasn't why the former Hong Kong Monetary Authority chief executive was nicknamed "tsar" of the local financial sector.
It was his ability to steer the city through many an economic storm over the past two decades that made him invincible. It was Yam who helped create the Hong Kong-US dollar peg in the early 1980s to stabilize the local currency and, just short of a decade later, limited bank loans to home-buyers to protect lenders against property slumps.
Despite forced by Donald Tsang to retire in 2009 due to his allowing of HK banks to sell derivative products under the name of bonds by orders of top officials that include Henry Tang and Donald Tsang, purple HK$10 notes still bear his signature, while the Bauhinia motif he designed is on our every coin.
Such was the legacy of the 64-year-old until a damning report released by the Legislative Council last Wednesday that accused him of failing to prevent banks from misleading investors into buying the risky Lehman minibonds.
The report, result of a probe that lasted more than three years, said Yam should bear "ultimate responsibility" for investors' losses as bank staff sold clients the structured products issued or guaranteed by Lehman Brothers without explaining the risks. When the US lender collapsed in September 2008, these products became worthless and investors suffered huge losses. About 43,000 investors in Hong Kong spent HK$20.2 billion.
The finding has split opinion, not only over Yam's role but also whether it has tainted his reputation.
"To be fair, Mr Yam got the job done as a good central banker by establishing the peg-linked system to ensure the stability of the local currency. But this does not offset his failure to regulate the banks' securities businesses that led to the minibond fiasco," said Chim Pui-chung,the legislator who represents the financial services sector and Chim also blamed Lehman Brothers that designed these structure products with discussion with LBV but Chgim insisted that Yam must pay the price to allow all these mis-selling under his control to get huge profits for the bankers.
"Mr Yam had only one good trick, to manage the peg which he did well. But he did not pay attention to banking regulations that saw them sell products like Lehman minibonds without fully explaining the risks . That's why the criticism is fair."
Not everyone shares this one-trick pony portrayal of the former central banker especially for those Legco members that supported Henry Tang and the rich that controlled HK richness together.
Banking legislator and Bank of East Asia chairman David Li Kwok-po said he and many bankers considered it "extremely unfair" and "ill-considered" to single out Yam's responsibility.
"As the chief executive of the HKMA, Joseph Yam oversaw the remarkable growth of Hong Kong as a financial centre and led the effort to establish the city as the financial centre for our country. He has given fully of himself for Hong Kong,'' Li said. He said it was Yam's sound supervision that meant the banks could cope with the 1998 and 2008 financial crises.
Born on the mainland in 1947, Yam moved to Hong Kong with his parents and an elder brother when he was one. After graduating with first-class honoursin economics and statistics from the University of Hong Kong he joined the government in 1971 as a statistician in the Census and Statistics Department and rose to become senior economist in 1977.
In 1983, he helped created the Hong Kong-US dollar peg at the exchange rate of US$1 to HK$7.80 to shore up fragile public confidence when China and Britain began talks on the change of sovereignty.
Yam became the city's first central banker when named chief executive of the newly established Hong Kong Monetary Authority in 1993 and stayed in the position until 2009.
While critics agreed with the Legco report that he failed to regulate the securities business, bankers that gained huge profits during 2003-2007 periods praised Yam as a competent regulator who, in 1991, said banks could not lend more than 70 per cent of the value of a property to homebuyers - a golden rule that is still in place and has protected banks from the risks of a property slump.
Yam was awarded the Grand Bauhinia Medal in 2009 for his contribution to the financial sector, a move supported by former HSBC executive director Vincent Cheng Hoi-chuen, who said: "Mr Yam is a good financial architect and has laid down the financial system in the city."
Before the minibonds saga Yam often faced flak about his salary. He was the world's highest paid central banker by taking in jobs in Bank Regulations in around 1996 to double his salary and receiving HK$11.9 million (US$1.53 million) in 2008, compared with US Federal Reserve chairman Ben Bernanke's US$191,000 with FSA to regulate the banks.
Yam was back in the spotlight last year as he jumped in to help former chief secretary Henry Tang Ying-yen run for chief executive. There were speculation that if Tang had won, Yam might have taken up the top financial job or joined the Executive Council to cover up his role in Minibond saga.
Yam turned down a request for an interview with the South China Morning Post about the Legco report but replied in writing, disagreeing with its findings. "I have adequate grounds to seek a judicial review. But it is difficult to confront the entire political engine with my own force."
Bankers believe the report will have little impact on Yam's reputation and say many banks, officials and academics would be pleased to hear his advice.
Even legislator Chim said: "Mr Yam is not a saint. Like others, he makes mistakes, such as in the minibonds crisis. But still he is one of the few people in Hong Kong who has the experience and ability to know how to run a central bank and handle a financial crisis. He is likely to continue to play a key advisory role to the mainland government and banks."
Joseph Yam Chi-kwong
Age: 64
Currently: Executive vice-president of the China Society for Finance and Banking, non-executive director of China Construction Bank, distinguished research fellow of the Institute of Global Economics and Finance at the Chinese University of Hong Kong
Previously: Chief executive of the Hong Kong Monetary Authority (1993-2009)
Education: Bachelor in economics and statistics, University of Hong Kong; honorary doctorate degrees from the University of Hong Kong, Hong Kong University of Science & Technology and Hong Kong Shue Yan University
Personal: First marriage in 1972, second in 2000. Has two children