Taskforce still working on Lehman buy-back, minister says

PUBLISHED : Saturday, 29 November, 2008, 12:00am
UPDATED : Saturday, 29 November, 2008, 12:00am

The taskforce appointed by Hong Kong banks to handle Lehman Brothers derivatives was still preparing as best it could to buy them back from investors despite US legal hurdles, the financial secretary said.

Under United States bankruptcy law the credit default swaps, which are among the assets underlying the complex financial products may not be terminated - but that is a necessary step for a buy-back.

A Commercial Radio report quoted John Tsang Chun-wah as calling the problem a technical issue and said the Hong Kong Association of Banks' taskforce. It quoted him as saying the taskforce had been aware of the legal situation but had felt a buy-back offered investors the quickest way of getting their money back.

The banks agreed to a buy-back under government pressure after investors who bought HK$15.7 billion in Lehman-linked derivatives claimed their staff had mis-sold the products as low-risk. In fact, the derivatives - mostly so-called minibonds - were high-risk and lost much or all of their value when Lehman Brothers, a US investment bank, filed for bankruptcy on September 15.

The taskforce has not decided whether to proceed with a buy-back. However, the US legal hurdle is likely to prevent one.

Thirty people who bought Lehman-linked derivatives from British bank Standard Chartered marched to Temasek Holdings' office and the British consulate in Admiralty, and to Government House, to press their demand that the bank investigate their complaint of mis-selling. Singapore state firm Temasek owns 19 per cent of the bank.