SCMP:Monetary chief defends actions in minibond saga I'm not shirking role: Joseph Yam

Monetary Authority chief Joseph Yam Chi-kwong stressed yesterday that the Securities and Futures Commission should be responsible for monitoring the disclosure of information on financial products.

"I'm not shirking responsibility," Mr Yam said. "The division of labour is very clear the HKMA does not have the power" to review the commission's work, he told a Legislative Council public hearing on the minibond saga.

While he conceded that the authority was responsible for regulating banks on the sale of structured products, he said: "My colleagues and I have done what we can do and we have fulfilled our responsibilities to get the job done to the best especially the job of regulating banks on the selling of structural products."

He was the second official to testify before the Legco subcommittee on Lehman Brothers-related financial products, after Chan Ka-keung, secretary for financial services and the treasury.

More then 48,000 investors in Hong Kong bought HK$20 billion worth of Lehman minibonds and structured products. Minibonds are not corporate bonds but consist of high-risk credit-linked derivatives that are marketed as a proxy investment in well-known companies.

Mr Yam was asked if the regulator had failed to protect investors by allowing high-risk financial products such as minibonds to be sold to ordinary investors.

He said the disclosure of information about financial products was beyond the responsibilities of the authority; the SFC, however, should be accountable. He also said that banks and brokers, rather than the regulators, should be responsible for assessing the risk of financial products.

Still, Mr Yam said the authority requested that banks raise the risk level of derivatives such as minibonds after it found in 2007 that only half of the 16 banks it investigated ranked those products as high-risk.

Mr Yam said he had repeatedly warned the public about the risk of buying derivatives products from the middle of 2006. Local banks were no longer offering Lehman minibonds by June last year.

He revealed that from April 2003 - when the Securities Ordinance came into effect - until Lehman Brothers' collapse in September last year, the authority had found 178 suspected cases of the mis-selling of financial products by banks. Of the 33 cases that have been closed, in nine cases banks were found guilty and were penalised.

Democratic Party lawmaker Emily Lau Wai-hing said the process was too slow and the authority had only finished investigating about 6,000 of more than 20,000 complaints related to Lehman products.

Mr Yam said the watchdog would recruit more staff, but some people found investigative work "disgusting". He expected to have dealt with 70 per cent of complaints by next March. About 300 investors who bought Lehman-related products protested outside Legco before the meeting yesterday. They said the regulators should be blamed for letting banks sell high-risk products.