3 Fridays in 3 cities yield 3 remedies
By Zhen Ming
I'VE somehow crash-landed my time-machine in the middle of Harvard Square on 8Aug 2008 when I should have been at the Bird's Nest in Beijing.
But my wayward trip on this freaky Friday is not entirely wasted.
While the Chinese capital is enjoying its Olympic moment, I learn first-hand that three of the biggest banks operating in the US - UBS, Citigroup and Merrill Lynch - have pledged to buy back nearly US$39 billion ($58 billion) worth of bonds that their retail clients couldn't sell.
The Swiss bank UBS has reached a US$19.4 billion agreement to buy back bonds in the biggest settlement yet over claims that several US banks had misled investors to buy the so-called 'auction-rate securities', the Massachusetts Secretary of State's office at Beacon Hill in downtown Boston said on that momentous Friday.
Citigroup's buyback - announced just a day earlier in coordination with US regulators - called for the bank to re-purchase up to US$7.3 billion of bonds from its smallest customers in the collapsed US auction-rate securities market.
Merrill (soon to be acquired by Bank of America) also announced its plan, which called for the bank to buy back up to US$12 billion in bonds.
For an industry that normally vigorously stonewalled investor lawsuits and delayed settlements with US regulators, the astonishing speed and seeming generosity of the buyback plans indicated the severity of the three banks' public relations problem.
In reaching their settlements, the three banks did not acknowledge any wrongdoing.
Fast forward 70 days and I find myself teleported to Hong Kong. And it is here that I experience deja vu - basically, yet another freaky Friday.
After weeks of wrangling with small investors, the Hong Kong Association of Banks announces that it has agreed to a government plan - more like an ultimatum, to me - for ALL banks in Hong Kong to buy back, at market prices, the by-now-infamous 'Minibonds'.
(These are complex structured products once arranged by the now-bankrupt Lehman Brothers and sold aggressively through Hong Kong banks.)
Reportedly, more than 40,000 affected investors in Hong Kong - many of them pensioners whose life savings were tied up in the products - have been staging noisy demonstrations in protest.
They are particularly angered by what they perceive as 'misleading' marketing techniques by the banks that sold the products.
All in all, they had bought some HK$20 billion ($4 billion) of these structured notes.
Rightly or wrongly, the Hong Kong Monetary Authority and the Securities Futures Commission there have borne the brunt of the flak for failing to monitor the financial institutions selling these products.
Quick closure
But with this latest move, the banks in Hong Kong are hoping to bring to a quick close an issue that has caused widespread anger and mistrust.
Meanwhile, the fate of the Minibonds that brought the global credit crunch closer to the lives of ordinary Hongkongers has also been felt in Singapore.
Last Friday, in an announcement, partly in response to developments in Hong Kong, the Monetary Authority of Singapore (MAS) said it now wants banks and other financial institutions here to give 'top priority' when investigating complaints of mis-selling similar Minibonds to lowly-educated retiree investors.
MAS also wants the financial institutions to avoid taking an 'overly legalistic' approach in dealing with such cases. And in situations where the product was mis-sold or was clearly inappropriate, given the investor's profile and circumstances, MAS wants the institutions to take full responsibility.
'We expect them to do the right thing,' said MAS managing director Heng Swee Kiat at Friday's press conference.
Asked to elaborate, Mr Heng later told The Straits Times in an e-mail reply that 'the financial institutions should reach a fair settlement in full or in part'.
Said former NTUC Income chief Tan Kin Lian, who has championed the plight of Minibond investors in Singapore: 'I suggest (for most cases) that the amount to be paid can be the current value plus half of the difference; that is, the investor and distributor share the loss equally.'
Expect Singapore's 'tailor-made' solution - which strives for fairness - to drag on, as every claim here has to be worked out case by case.
In contrast, Hong Kong's 'one-size-fits-all' solution - which strives to buy back all Minibonds at the same price- is likely to proceed efficiently, though it may seem somewhat arbitrary, even unfair.
Many Hongkongers have, in fact, rejected this plan. They want a full refund instead - something possible only under special circumstances in Singapore.
Source: The New Paper, Sun 19 Oct 2008
By Zhen Ming
I'VE somehow crash-landed my time-machine in the middle of Harvard Square on 8Aug 2008 when I should have been at the Bird's Nest in Beijing.
But my wayward trip on this freaky Friday is not entirely wasted.
While the Chinese capital is enjoying its Olympic moment, I learn first-hand that three of the biggest banks operating in the US - UBS, Citigroup and Merrill Lynch - have pledged to buy back nearly US$39 billion ($58 billion) worth of bonds that their retail clients couldn't sell.
The Swiss bank UBS has reached a US$19.4 billion agreement to buy back bonds in the biggest settlement yet over claims that several US banks had misled investors to buy the so-called 'auction-rate securities', the Massachusetts Secretary of State's office at Beacon Hill in downtown Boston said on that momentous Friday.
Citigroup's buyback - announced just a day earlier in coordination with US regulators - called for the bank to re-purchase up to US$7.3 billion of bonds from its smallest customers in the collapsed US auction-rate securities market.
Merrill (soon to be acquired by Bank of America) also announced its plan, which called for the bank to buy back up to US$12 billion in bonds.
For an industry that normally vigorously stonewalled investor lawsuits and delayed settlements with US regulators, the astonishing speed and seeming generosity of the buyback plans indicated the severity of the three banks' public relations problem.
In reaching their settlements, the three banks did not acknowledge any wrongdoing.
Fast forward 70 days and I find myself teleported to Hong Kong. And it is here that I experience deja vu - basically, yet another freaky Friday.
After weeks of wrangling with small investors, the Hong Kong Association of Banks announces that it has agreed to a government plan - more like an ultimatum, to me - for ALL banks in Hong Kong to buy back, at market prices, the by-now-infamous 'Minibonds'.
(These are complex structured products once arranged by the now-bankrupt Lehman Brothers and sold aggressively through Hong Kong banks.)
Reportedly, more than 40,000 affected investors in Hong Kong - many of them pensioners whose life savings were tied up in the products - have been staging noisy demonstrations in protest.
They are particularly angered by what they perceive as 'misleading' marketing techniques by the banks that sold the products.
All in all, they had bought some HK$20 billion ($4 billion) of these structured notes.
Rightly or wrongly, the Hong Kong Monetary Authority and the Securities Futures Commission there have borne the brunt of the flak for failing to monitor the financial institutions selling these products.
Quick closure
But with this latest move, the banks in Hong Kong are hoping to bring to a quick close an issue that has caused widespread anger and mistrust.
Meanwhile, the fate of the Minibonds that brought the global credit crunch closer to the lives of ordinary Hongkongers has also been felt in Singapore.
Last Friday, in an announcement, partly in response to developments in Hong Kong, the Monetary Authority of Singapore (MAS) said it now wants banks and other financial institutions here to give 'top priority' when investigating complaints of mis-selling similar Minibonds to lowly-educated retiree investors.
MAS also wants the financial institutions to avoid taking an 'overly legalistic' approach in dealing with such cases. And in situations where the product was mis-sold or was clearly inappropriate, given the investor's profile and circumstances, MAS wants the institutions to take full responsibility.
'We expect them to do the right thing,' said MAS managing director Heng Swee Kiat at Friday's press conference.
Asked to elaborate, Mr Heng later told The Straits Times in an e-mail reply that 'the financial institutions should reach a fair settlement in full or in part'.
Said former NTUC Income chief Tan Kin Lian, who has championed the plight of Minibond investors in Singapore: 'I suggest (for most cases) that the amount to be paid can be the current value plus half of the difference; that is, the investor and distributor share the loss equally.'
Expect Singapore's 'tailor-made' solution - which strives for fairness - to drag on, as every claim here has to be worked out case by case.
In contrast, Hong Kong's 'one-size-fits-all' solution - which strives to buy back all Minibonds at the same price- is likely to proceed efficiently, though it may seem somewhat arbitrary, even unfair.
Many Hongkongers have, in fact, rejected this plan. They want a full refund instead - something possible only under special circumstances in Singapore.
Source: The New Paper, Sun 19 Oct 2008
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