Sealed findings of a report into the sale of Lehman Brothers minibonds reveal that banks continued to push the ill-fated products and recommend them to vulnerable customers up to a month before the bank collapsed.
The deleted sections of the Hong Kong Monetary Authority report, embargoed since December, show 87 of 238 complaints that institutions continued to sell Lehman minibonds even as the bank's credit quality deteriorated during August and September last year.
It also cites 102 complaints that banks sold Lehman minibonds to vulnerable customers including the elderly and illiterate, 15 cases of customer risk appetite being incorrectly assessed due to computer system error and 34 of mistakes in documentation. The HKMA had agreed to give censored parts of the report only to a Legislative Council subcommittee probing the Lehman fiasco for closed-door discussion, but legislators insisted on revealing them to the public.
It had warned legislators not to reveal details of the censored material as it could be incorrect and lawmakers were bound to discuss the issue at yesterday's hearing, subcommittee chairman Raymond Ho Chung-tai said.
``The disclosure of the omitted part may have a negative impact on people taking civil action and the Securities and Futures Commission in negotiating with sellers of Lehman products,'' HKMA chief executive Joseph Yam Chi-kwong told legislators at his third hearing on the controversy.
``Any legal challenge due to the disclosure of the full report before investigations are completed is the last thing we want to see.''
Yam will attend another hearing on May 8 and the subcommittee has summoned his deputy Choi Yiu-kwan to appear on May 26.
The Hong Kong Association of Banks has expressed concern over the disclosure in a letter to the subcommittee, Ho added.
Yam said there was a rise in complaints related to structured product sales last year, and that although the HKMA recorded 178 cases between 2003 and 2008, only one institution was punished.
``We are not trying to harbor banks. We take the cases seriously and will not let [banks] go if misselling is confirmed,'' he said.
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