Hungarian financial market regulator PSzÁF said it had fined K&H Bank the maximum HUF 10 million (€33,467) for deficiencies in the distribution of CDOs that might have misled clients.
K&H Bank sold CDO products of its parent bank KBC Bank as well as its own bonds linked to the payments of the group's earlier CDO bonds.
K&H Bank committed a severe breach of the Capital Market Act when it unilaterally and without advance information ceased to make a market for the CDOs when these were downgraded by a rating agency, PSzÁF said. The bank had guaranteed a liquid secondary market for the CDO products when offering them.
K&H also failed to officially publicize the fact that a rating agency had placed some of the CDOs issued by the group on negative watch in March 2008.
CDO bonds offered to clients for a term of ten years proved to be far longer investments, of up to 35 years in some cases, the regulator said.
PSzÁF said the bank misled clients when offering the structured products as bonds “with a risk level on par with that of government bonds, but paying higher interest,” without indicating that the equal risk means an equal rating. (MTI – Econews)