A lone protester stands in front of a Citibank branch in Hong Kong in 2009 protesting against the bank's past sales of controversial financial products backed by Lehman Brothers. The bank said on Friday that it plans to repurchase the notes at 80 percent of the original value. Philippe Lopez / AFP

Despite offer to buy 80% of original value at $140m, the saga rumbles on

Citibank announced on Friday that it has agreed to buy back HK$1.06 billion ($140 million) of structured notes issued by Lehman Brothers and distributed by Citibank in Hong Kong at 80 percent of the original value.

The city's top financial market watchdogs - the Securities and Futures Commission (SFC), along with the Hong Kong Monetary Authority (HKMA) - also announced that they reached an agreement with Citibank (Hong Kong) Limited (Citibank HK) on the sales of market-linked notes (MLNs) and equity-linked notes (ELNs). They are both different products from the minibonds that were issued by Lehman Brothers, the global investment bank that collapsed in the 2008 financial crisis.

The total value of Citibank HK's repurchase offer of HK$1.06 billion covers about 92 percent of its customers holding the outstanding notes.

Citibank HK made the repurchase agreement without admitting any liability, according to a statement.

SFC said the bank's written guidelines to staff regarding the sales of securities were "comparatively sound and provided a foundation for compliance with key regulatory requirements".

However, the regulator raised several concerns in the statement on the bank's guidelines and procedures, such as risk disclosure, assessment of customers' risk tolerance and overall monitoring of the sale process of the notes.

Both SFC and HKMA said in the statement that they will not impose sanctions against the bank and its employees involved in selling the notes.

"This outcome is a demonstrably good one for affected customers and brings the matter to an appropriate conclusion," said the SFC's acting chief executive officer, Alexa Lam.

However, not all the investors were happy with the outcome and some vowed to fight on. Protests have been marked by disenchanted investors who have gathered outside banks in Central to chant slogans and beat drums in anger.

Eddy Chan, convener of the Alliance of Lehman Brothers Victims, said affected investors are very disappointed with the settlement, arguing that the city's regulators have failed to fulfill their responsibilities.

"After Lehman collapsed, both HKMA & SFC made no actions or inspections. Up until now, no banks are punished, and not a single person in the government body shoulders any responsibility," said Chan.

The self-organized group will take to the street on July 9, their sixth protest since May.

"We believe someone must take responsibility and we demand 100 percent payback. The local government has been lousy at handling this, so we hope the central government can step in and take a deep look into it," said Chan.

Friday's agreement with Citibank came after Sun Hung Kai Investment Services was fined HK$4.5 million by the SFC in June for failures including inadequate due diligence and training of staff, among others.

In March, Standard Chartered Plc agreed to repurchase HK$1.48 billion worth of structured notes linked to Lehman Brothers, or 95 percent of the outstanding value.

In March, 16 Hong Kong banks offered to pay back Lehman minibond investors up to 96.5 percent of their investments.

About 43,000 Hong Kong investors bought an estimated HK$15.7 billion worth of Lehman-issued financial products.

joyli@chinadailyhk.com

China Daily

(HK Edition 07/09/2011 page2)