Cover Up! Hong Kong's Regulation of Exchange-Traded Warrants

Regulatory interest in financial derivatives centres on how unforeseen shocks might affect their value. Current concerns arise from prolific growth in the use of derivatives by financial institutions for credit risk transfer, the scale of which some national authorities find disquieting. However, attention in Hong Kong applies to a wholly different setting, springing from its prominent market in listed covered warrants. The regulatory regime for these instruments is fractured, porous, and conflicts with precepts of international practice to which the territory nonetheless subscribes. Primary oversight is entrusted to the Stock Exchange of Hong Kong, a body neither equipped nor inclined to perform the function authoritatively. Slender, variable disclosure requirements do little to inform participants as to the balance of risk and reward inherent in these products, and since most warrant buyers are non-professional individuals, a pronounced market correction would create a significant moral hazard for Hong Kong's government.published_or_final_versio

Investment banks

Investment banking is a generic term for transactional activities involving financial intermediation conducted through open markets. It was long associated with a legal demarcation in the US and Japan that separated banks that made loans and took deposits from those that traded in securities, but now denotes risk-based activities in banks of any kind. This paper explains investment banking practices in terms of reputational capital, and contrasts the transactional skills and innovation found in successful investment banks with concerns as to the societal value of their activities that have developed since the 2007-09 global crisis.postprin

The global credit crisis and securitization in East Asia

postprin

Post-Crisis Financial Integration in East Asia

organized by HKSAR Central Policy Unit / Centre of Asian Studies, University of Hong KongFinancial integration is less pronounced in East Asia than among states in Europe and North America, or compared to economic integration within the region. Cross-border trade flows, direct investment and investment in capital goods have long been greater and faster growing than other investment flows, while regional institutional and legal structures are scarce and frequently insubstantive. This dichotomy persists despite suggestions since the early 1990s that Asian financial integration would accelerate, most especially following the East Asian financial crisis of 1997-98, including the growth of regional representative organizations and in national enthusiasm for the World Trade Organization. In particular, it defies post-crisis expectations that greater financial integration might prevent or lessen the impact of future financial shocks. This article suggests explanations in legal, governance and institutional frameworks for the paradox of modest financial integration accompanying robust economic growth and trade integration. First, cultural norms militate against regional innovation in financial markets and systems. Second, other economic institutions have tended to resist market-orientated regional reform. Above all, states failed to collaborate effectively in solutions to regional contagion during and following the 1997-98 financial crisis. Without improving financial integration, Asia will maintain a reliance on risk averse portfolio selection and excessive international reserve accumulation, all to the detriment of its financial markets.published_or_final_versio

Complex instruments, financial re-regulation and contractual freedom

Session 3Current Issues in Financial Regulation, Faculty of Law, Chinese University of Hong Kong, 12 January 2010

Dictum non meum pactum: Lehman's minibond transactions

Commen

Globalisation & business ethics

Reviews: Karl Homann, Peter Koslowski and Christoph Luetge (eds), [United Kingdom: Ashgate, 2007, ppvii + 244, Hardback, HK$895, US$114.95], ISBN 978-0-7546-4817-