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BOCHK to pay for minibonds damages
By Nerilyn Tenorio |
July 24, 2009, Friday
|
Print Edition
Print Edition
BOC Hong Kong (Holdings) Ltd has said its group may have to pay at least HK$3.6 billion (US$465 million) to compensate investors who lost money on Lehman Brothers' structured products or minibonds by repurchasing them.
The payment is part of the HK$6.3-billion compensation deal between banks and investors announced by the Hong Kong government on Wednesday. On top of that amount, the BOCHK Group, which also includes Nanyang Commercial Bank Ltd and Chiyu Banking Corp Ltd, and whose parent is the Bank of China, will have to set aside HK$160 million for collateral recoveries, it said.
"People see this as a one-off thing, it's been simmering for a while. The bank is a pretty profitable bank, so it must have made enough provisions for this," said Howard Gorges, director at South China Brokerage.
Hong Kong's securities watchdog on Wednesday said the deal reached with 16 distributing banks would enable the vast majority of investors who hold minibonds to receive equal to or greater than what they could otherwise recover at current market values.
Separately, the Bank of East Asia estimates its repurchases would amount to HK$105 million but said it would also make additional provisions of up to HK$3.9 million to fund collateral recoveries. Fubon Bank said its estimated total amount involved in the repurchase exercise was about HK$313 million if all eligible customers accepted the offer. More than 30,000 Hong Kong investors sank nearly US$2.5 billion into the derivative products which failed as Lehman Brothers collapsed in September.
Many of them blamed the Hong Kong Monetary Authority for allowing local banks to sell the products without making investors aware they were risky products.
The payment is part of the HK$6.3-billion compensation deal between banks and investors announced by the Hong Kong government on Wednesday. On top of that amount, the BOCHK Group, which also includes Nanyang Commercial Bank Ltd and Chiyu Banking Corp Ltd, and whose parent is the Bank of China, will have to set aside HK$160 million for collateral recoveries, it said.
"People see this as a one-off thing, it's been simmering for a while. The bank is a pretty profitable bank, so it must have made enough provisions for this," said Howard Gorges, director at South China Brokerage.
Hong Kong's securities watchdog on Wednesday said the deal reached with 16 distributing banks would enable the vast majority of investors who hold minibonds to receive equal to or greater than what they could otherwise recover at current market values.
Separately, the Bank of East Asia estimates its repurchases would amount to HK$105 million but said it would also make additional provisions of up to HK$3.9 million to fund collateral recoveries. Fubon Bank said its estimated total amount involved in the repurchase exercise was about HK$313 million if all eligible customers accepted the offer. More than 30,000 Hong Kong investors sank nearly US$2.5 billion into the derivative products which failed as Lehman Brothers collapsed in September.
Many of them blamed the Hong Kong Monetary Authority for allowing local banks to sell the products without making investors aware they were risky products.
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