State-backed Royal Bank of Scotland – along with four other City banks – has been named as part of an investigation into recent floats on the Hong Kong Stock Exchange.
The Hong Kong regulator has referred RBS, along with HSBC, JP Morgan, UBS and Deutsche Bank to Hong Kong's central bank amid concerns about the quality of recent floats.
Hong Kong has dominated the world markets for IPOs in recent years, raising a record-breaking $57.8bn (£35.6bn) last year as companies chose to go East over New York or London.
In the next three months alone, mining giant Glencore, and upmarket goods group Prada are likely to push the value of initial public offerings to another record, with an estimated $20bn being raised. Luggage manufacturer Samsonite has also hired a slew of banks, including RBS, HSBC and UBS, for its planned IPO in Hong Kong.
However, this latest investigation into "sponsor banks" has raised questions about the quality of advice companies are getting and the transparency and accuracy of information given to shareholders.
Last month, the Securities and Futures Commission (SFC) conducted a similar investigation looking at 17 of the 73 securities firms in Hong Kong. Although it did not name the offending banks, the SFC said it had identified serious lapses in behaviour, including non-disclosure of potentially illegal financing arrangements and, in one instance, a bank which relied on legal advice that failed to address potentially illegal transactions. It also said banks often did not have enough staff covering each deal.
It is the Hong Kong Monetary Authority that has made the recommendation to Hong Kong's central bank to specifically target the five banks, including RBS.
The Hong Kong regulator was reported as saying that the nature and degree of deficiencies varied among each of the banks, adding it would follow up with the target institutions to ensure action was taken, and that a further review was due to be completed by the end of June.
UBS, the top arranger for Hong Kong IPOs by value in 2009, was behind the 2009 flotation of Beijing-based China Forestry Holdings. However, by January this year the company's shares were suspended after accountants discovered "irregularities" in the first full-year audit since its debut.
Aluminium producer Rusal –which was the very first non-Asian company to list in Hong Kong – recently said it was looking at listing in North America.
UBS, along with RBS, HSBC and Deutsche Bank declined to comment.
The Hong Kong regulator was reported as saying that the nature and degree of deficiencies varied among each of the banks, adding it would follow up with the target institutions to ensure action was taken, and that a further review was due to be completed by the end of June.
UBS, the top arranger for Hong Kong IPOs by value in 2009, was behind the 2009 flotation of Beijing-based China Forestry Holdings. However, by January this year the company's shares were suspended after accountants discovered "irregularities" in the first full-year audit since its debut.
Aluminium producer Rusal –which was the very first non-Asian company to list in Hong Kong – recently said it was looking at listing in North America.
UBS, along with RBS, HSBC and Deutsche Bank declined to comment.
