Hi Mr. Tan,
Investors in Singapore have no real safe alternatives to park their money and get a fair return if they don't want any risk. So, what is a fair return for keeping money safe? My feel is that, the return should at the very least offset inflation.
However, for far too long, savings/fixed deposit rates at banks here are ridiculously low. The last time I checked, POSB/DBS, fixed deposit is at around 0.45 percent to 0.75 percent, for most people, of course, depending on amount & tenure. This can hardly offset inflation that is much higher, 5 to 6 percent.
The Singapore government has long pursued a strong SGD to fight inflation. The trinity of inflation, interest rates & foreign exchange is supposedly linked by the PPP, purchasing power parity. However, for the short term PPP may not hold and distortions can persist for years. So, with our recent SGD weakening, we would see higher SGD interest rates instead ?
Some of my friends even suggest that the the Singapore government providing long running subsidy for local banks. Just consider this, local banks take in funds from depositors at less than 1 percent rate, and then invest in Singapore Government Securites, which depending on tenure, can yield up to 3.6 percent. Banks have to hold a certain amount of SGS anyway, as stipulated under MLA requirement from the central bank, MAS.
So, assuming 3 percent spread on say, 300mil, that's 15mil, almost risk free for the banks!
Regards
Sunday, October 26, 2008
Electricity prices: 82% higher her than in Hong Kong
Paul Chan wrote to the Straits Times Forum about our electricity charges. Hong Kong residence pasy 17 cents per nit. Singaporeans pay 31 cents - 82% higher. Electricity in Singapore is more expensive than in USA or France.
What is happening? I recall these events but cannot remember the details:
1. Our power plants sold by Temasek to foreign shareholders?
2. Singapore hedged the price of oil, and are now stuck with the higher contracted prices?
I like to invite the knowledgeable people to put some details into what is happening here. You can also help to search Google for the facts.
What is happening? I recall these events but cannot remember the details:
1. Our power plants sold by Temasek to foreign shareholders?
2. Singapore hedged the price of oil, and are now stuck with the higher contracted prices?
I like to invite the knowledgeable people to put some details into what is happening here. You can also help to search Google for the facts.
Profit margin in creating the structured product
Comment posted in my blog
I am greatly sadden by the losses sufered by the HN5 investors. As an insider, I understand that the sale of high notes products was a highly profitable business for the bank. The product is doubly leveraged - the first-to-default risk and the underlying collaterialsed debt obligation.
Even in early 2007 where credit risk is severely underpriced, the return for the risk undertaken that is passed to HN5 investors borders on ridiculous. The bank keeps a fat margin.
I would suggest HN5 investors ask the bank to oepn its book on the structuring profit for high notes products.
Even if the bank refuses to compensate the 'non-vulnerable' investors, the bank should not be allowed to make money from them.
It also seems that the bank is not so truthful when they said that they were caught unaware by the collapse of Lehman Brothers. i understand that bank had bought CDS protection to hedge the bank's own exposure to Lehman, and have avoided trading with Lehman to reduce counterparty exposure as early as 1Q2008
I know this would drag DBS profit and shares price down further, but my guilt does not allow me to keep quiet.
REPLY
The Petition #1 ask the Government to investigate the creation and marketing of the products. In my supporting document, I asked the Government to look into the accounts for the structured products to see how much money is taken away by the product issuer and the marketeer.
I hope that MAS will pursue this matter. If not, I will ask a Member of Parliament to raise this matter in Parliament.
I am greatly sadden by the losses sufered by the HN5 investors. As an insider, I understand that the sale of high notes products was a highly profitable business for the bank. The product is doubly leveraged - the first-to-default risk and the underlying collaterialsed debt obligation.
Even in early 2007 where credit risk is severely underpriced, the return for the risk undertaken that is passed to HN5 investors borders on ridiculous. The bank keeps a fat margin.
I would suggest HN5 investors ask the bank to oepn its book on the structuring profit for high notes products.
Even if the bank refuses to compensate the 'non-vulnerable' investors, the bank should not be allowed to make money from them.
It also seems that the bank is not so truthful when they said that they were caught unaware by the collapse of Lehman Brothers. i understand that bank had bought CDS protection to hedge the bank's own exposure to Lehman, and have avoided trading with Lehman to reduce counterparty exposure as early as 1Q2008
I know this would drag DBS profit and shares price down further, but my guilt does not allow me to keep quiet.
REPLY
The Petition #1 ask the Government to investigate the creation and marketing of the products. In my supporting document, I asked the Government to look into the accounts for the structured products to see how much money is taken away by the product issuer and the marketeer.
I hope that MAS will pursue this matter. If not, I will ask a Member of Parliament to raise this matter in Parliament.
BBC radio documentary on structured products
Commemt posted in my blog
It is terrifying to hear from this bbc documentary that you have published on your site about reputable banks resorting to dirty tricks. I urge that this radio documentary to be heard by the public as it reveal many disturbing discovery.
http://www.bbc.co.uk/worldservice/documentaries/2008/10/081022_failure_or_fraud.shtml
Call to MAS - pass general guideline for compenstion
Comment posted in my blog
The only solution of this SAGA is to ask MAS pass the message down to ALL distributors to set general guideline for compensation.those are not happy can continue to take legal action later.Some buy from broker firms, the firms can argue that we send the brochure to you and you can decide not to buy. firms are only the distributer.We , singaporean always have this in mind, the FI dares to send such brochure to customers,the product must have been approved by MAS and safe. The product advertisement on newspaper is so BIG. It should be safe , espectially ,series by series continously, it should be safe.
The only solution of this SAGA is to ask MAS pass the message down to ALL distributors to set general guideline for compensation.those are not happy can continue to take legal action later.Some buy from broker firms, the firms can argue that we send the brochure to you and you can decide not to buy. firms are only the distributer.We , singaporean always have this in mind, the FI dares to send such brochure to customers,the product must have been approved by MAS and safe. The product advertisement on newspaper is so BIG. It should be safe , espectially ,series by series continously, it should be safe.
Husband's objection
Dear Mr Tan,
It is really kind of you to spend so much time and energy to help the unfortunate people who bought Mini Bonds and High Notes. My relationship manager from ABM Ambro too approached me many times to buy the Lehman minibond.
Do not let nasty comments discourage you and just focus on the truth. Many of us are greedy and I escaped the noose only because of my husband's objection.
EO
REPLY
You are fortunate to have a husband who is knowledgeable. Many people were badly advised by the sales representative and did not have a family member to advised them on the risk.
It is really kind of you to spend so much time and energy to help the unfortunate people who bought Mini Bonds and High Notes. My relationship manager from ABM Ambro too approached me many times to buy the Lehman minibond.
Do not let nasty comments discourage you and just focus on the truth. Many of us are greedy and I escaped the noose only because of my husband's objection.
EO
REPLY
You are fortunate to have a husband who is knowledgeable. Many people were badly advised by the sales representative and did not have a family member to advised them on the risk.
Blog for High Note investors
Hi Mr Tan,
We have created our blog to coordinate our HN group's activities. The blog is at:
http://dbshns.blogspot.com/
We will be grateful if you can help us publicise the blog in your respective websites.
We have created our blog to coordinate our HN group's activities. The blog is at:
http://dbshns.blogspot.com/
We will be grateful if you can help us publicise the blog in your respective websites.
Complaint Form
Several investors have asked me for the complaint form. I will make them available at Speaker's Corner on Saturdays 5 to 7 pm, over the next few weeks.
You can download the form here:
http://www.tankinlian.com/forms/complaint_form.pdf
Please come to collect the form there and also to meet other investors in your group (based on distributor). You can get assistance from the other investors.
I urge all investors to seek assistance from the other investors in your group. Please do not approach me on your individual cases, as I am not able to handle so many people. Be considerate for my health.
If you are not sure about how to present your statement, you can see a lawyer to write a statutory declaration and pay a fee of $120. It may be worth spending.
You can download the form here:
http://www.tankinlian.com/forms/complaint_form.pdf
Please come to collect the form there and also to meet other investors in your group (based on distributor). You can get assistance from the other investors.
I urge all investors to seek assistance from the other investors in your group. Please do not approach me on your individual cases, as I am not able to handle so many people. Be considerate for my health.
If you are not sure about how to present your statement, you can see a lawyer to write a statutory declaration and pay a fee of $120. It may be worth spending.
It will be handled 'fairly'
XI'AN (China) - SINGAPOREANS aggrieved by their investment in Lehman Minibonds and DBS High Notes 5 will have their complaints handled 'fairly and properly', Prime Minister Lee Hsien Loong assured on Sunday in his first remarks on the issue. He said it was understandable that some investors had reacted emotionally as they lost their money in a sudden and unexpected manner, while others felt that the risks had not been adequately explained to them.
But ultimately, the banks do realise that it is in their interest to resolve the matter quickly and not let it drag on, he told reporters in the western Chinese city of Xi'an where he wrapped up his five-day visit to China.
'The banks have what they call reputational risk,' said PM Lee. 'In other words, if you do the right thing, your customers will remember you for a long time.
'If you do the wrong thing, customers and potential customers will remember you for a long time. The banks and financial institutions know this and have every interest in sorting this out expeditiously and fairly.'
In Singapore, about 10,000 retail investors have invested over $500 million into structured products linked to now-bankrupt Lehman Brothers. DBS Bank, Hong Leong Finance and Maybank said last week that they would look into complaints and fast-track vulnerable cases, prompting some investors to worry that they would be left out.
The Prime Minister repeatedly stressed the notion of fairness during his lengthy remarks on the issue yesterday, and added that instances of mis-selling would be investigated.
Mis-selling, at its simplest, means giving the wrong advice to potential investors. Beyond that, it can also mean a failure to help clients diversify their assets, non-disclosure of risks or not completing a proper fact-find to ensure the product being sold suits the customer.
Said PM Lee: 'Where there has been mis-selling, it has to be put right.
'Where there has been less than professional behaviour by the relationship managers, or where things don't measure up to the standards that the Monetary Authority of Singapore (MAS) expects when you promote the financial products, then the banks have to do the right thing.'
The MAS said on Friday that it would look into complaints of mis-selling, and added that an imminent review of the structured products industry would address such issues as better descriptions and labelling of products, as well as more professionally trained relationship managers.
http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_295167.html
COMMENT
It is encouraging for the Prime Minister to emphasise on fairness. I hope that fairness has to be seen in the eyes of the aggrieved person. It will be difficult for the aggrieved person to feel that he (or she) has been fairly treated, unless the matter is settled through mutual agreement or by a fair, independent adjudication.
Some businesses hold the view that there are 4 million customers and if a few of them gets angry, there are other customers for them to tap. They also think that customers have short memories.
But ultimately, the banks do realise that it is in their interest to resolve the matter quickly and not let it drag on, he told reporters in the western Chinese city of Xi'an where he wrapped up his five-day visit to China.
'The banks have what they call reputational risk,' said PM Lee. 'In other words, if you do the right thing, your customers will remember you for a long time.
'If you do the wrong thing, customers and potential customers will remember you for a long time. The banks and financial institutions know this and have every interest in sorting this out expeditiously and fairly.'
In Singapore, about 10,000 retail investors have invested over $500 million into structured products linked to now-bankrupt Lehman Brothers. DBS Bank, Hong Leong Finance and Maybank said last week that they would look into complaints and fast-track vulnerable cases, prompting some investors to worry that they would be left out.
The Prime Minister repeatedly stressed the notion of fairness during his lengthy remarks on the issue yesterday, and added that instances of mis-selling would be investigated.
Mis-selling, at its simplest, means giving the wrong advice to potential investors. Beyond that, it can also mean a failure to help clients diversify their assets, non-disclosure of risks or not completing a proper fact-find to ensure the product being sold suits the customer.
Said PM Lee: 'Where there has been mis-selling, it has to be put right.
'Where there has been less than professional behaviour by the relationship managers, or where things don't measure up to the standards that the Monetary Authority of Singapore (MAS) expects when you promote the financial products, then the banks have to do the right thing.'
The MAS said on Friday that it would look into complaints of mis-selling, and added that an imminent review of the structured products industry would address such issues as better descriptions and labelling of products, as well as more professionally trained relationship managers.
http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_295167.html
COMMENT
It is encouraging for the Prime Minister to emphasise on fairness. I hope that fairness has to be seen in the eyes of the aggrieved person. It will be difficult for the aggrieved person to feel that he (or she) has been fairly treated, unless the matter is settled through mutual agreement or by a fair, independent adjudication.
Some businesses hold the view that there are 4 million customers and if a few of them gets angry, there are other customers for them to tap. They also think that customers have short memories.
Interviews with Financial Institutions
Many investors have reported unsatisfactory experiences when they attend the interviews called by the financial institutions. I suggest that they write to the independent "well regarded" persons appointed by the financial institution.
As you do not have the address of these persons, you can write to their specific name (i.e Mr. Gerard Ee, Mr. Law Song Keng or Mr. Hwang Soo Jin, c/o the Monetary Authority of Singapore).
If you attend an interview, as a fellow investor to attend with you. In turn, you can accompany the interview with the fellow investors.
This is unsatisfactory, but it is MAS way. Let us follow it as best as we can.
As you do not have the address of these persons, you can write to their specific name (i.e Mr. Gerard Ee, Mr. Law Song Keng or Mr. Hwang Soo Jin, c/o the Monetary Authority of Singapore).
If you attend an interview, as a fellow investor to attend with you. In turn, you can accompany the interview with the fellow investors.
This is unsatisfactory, but it is MAS way. Let us follow it as best as we can.
Unhappy with the interview
Dear Mr Tan,
I had attended the interview. It's feels like asking a criminal to conduct the trial and pass his own verdict. It may be a bit exaggerating but it's definitely not a fair trial. I will be surprise if anyone can get a fair hearing and compensaiton from this.
One of the most ridiculous question I was asked is, "If no one from X tell you it's a Fixed Deposit, what is your complaint then?". I never know a broking house is allowed to sell FD. I started to recall and found out that this person actually heads the department that was selling all these toxic products.....Head of Business Developement Department. So is it fair?
The other one is he claimed that X is only distributing and not selling. So there is no mis-selling. X not selling but did received a commission from the issuer, sound ridiculous again. I went alone; I will only challenge him when there is a fair trial.
I insisted on bringing the form home to fill in. He tried to pressured me to submit on the spot claiming that my hearing will be delay if I don't submit on the spot, etc. Clearly this is another one of those pressure tactic used. I told him off. I do not want to say much, because the other 2 persons just keep writing the moment I open my mouth. It was quite a hostile interview because of the stupid questions asked and the pressure tactic used.
It's a waste of time to attend. Think about it, it really a ridiculous approach from MAS. Like asking us to go commit sucide.
I'm sorry to bother you, but I think only you can help us and provide leadership to us since MAS is washing hand. I'm very disappointed with the government.
I wish to remain anonymous
REPLY
This is an interview. Is should not be described as a trial or interrogation. You can write a complaint to the "well regarded person" who is supposed to review the complaint handling process for the distributor, i.e. Mr. Ee, Mr. Low or Mr. Hwang.
I had attended the interview. It's feels like asking a criminal to conduct the trial and pass his own verdict. It may be a bit exaggerating but it's definitely not a fair trial. I will be surprise if anyone can get a fair hearing and compensaiton from this.
One of the most ridiculous question I was asked is, "If no one from X tell you it's a Fixed Deposit, what is your complaint then?". I never know a broking house is allowed to sell FD. I started to recall and found out that this person actually heads the department that was selling all these toxic products.....Head of Business Developement Department. So is it fair?
The other one is he claimed that X is only distributing and not selling. So there is no mis-selling. X not selling but did received a commission from the issuer, sound ridiculous again. I went alone; I will only challenge him when there is a fair trial.
I insisted on bringing the form home to fill in. He tried to pressured me to submit on the spot claiming that my hearing will be delay if I don't submit on the spot, etc. Clearly this is another one of those pressure tactic used. I told him off. I do not want to say much, because the other 2 persons just keep writing the moment I open my mouth. It was quite a hostile interview because of the stupid questions asked and the pressure tactic used.
It's a waste of time to attend. Think about it, it really a ridiculous approach from MAS. Like asking us to go commit sucide.
I'm sorry to bother you, but I think only you can help us and provide leadership to us since MAS is washing hand. I'm very disappointed with the government.
I wish to remain anonymous
REPLY
This is an interview. Is should not be described as a trial or interrogation. You can write a complaint to the "well regarded person" who is supposed to review the complaint handling process for the distributor, i.e. Mr. Ee, Mr. Low or Mr. Hwang.
Deposit Guarantee scheme in New Zealand
Hi Mr. Tan,
I thought you might be interested to know how the deposit guarantee scheme is being implemented in NZ.
A few points to note:
1) It is a facility where the Crown guarantees people who have deposits with institutions in the scheme. It covers all retail deposits of participating New Zealand-registered banks, and retail deposits by locals in non-bank deposit-taking entities. This would include building societies, credit unions and deposit-taking finance companies.
It only covers deposits and other debt securities.
2) Financial instutions are charged and the charges might be passed on to consumer at the banks' discretion.
For institutions with total retail deposits above $5 billion, a fee of 10 basis points per annum will be charged. This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.
Following changes announced on 22 October 2008, there are also now fees for the new business component of registered banks and non-bank deposit-takers that are not already subject to a fee charge. These institutions whose covered liabilities are under $5 billion will be charged the following fees on the cumulative growth in their book since 12 October 2008 (with an allowance of plus 10 per cent per year on this amount):
- 10 basis points per annum to institutions rated AA minus and above
- 20 basis points per annum to institutions rated A+, A and A minus
- 50 basis points per annum to institutions rated BBB+, BBB and BBB minus
- 100 basis points per annum to institutions rated BB+ and BB
- 300 basis points per annum to institutions rated below BB or are unrated
Growth would be measured, and charged for, monthly.
3) There is a deposit coverage cap of $1 million per depositor per covered institution
4) For non-residents:
The guarantee will cover resident and non-resident holders of debt securities issued by approved New Zealand registered banks.
However, for approved local branches of overseas banks existing on 12 October 2008, the guarantee for non-resident depositors in these branches will be capped at the total amount owed to such depositors at 12 October 2008, allowing for growth of 10 percent per year.
For approved non-bank deposit takers, only debt securities held by New Zealand tax residents or New Zealand citizens will be covered by the guarantee.
In all of the above situations, the deposit coverage cap of $1 million per depositor per covered institution also applies
5) Full set of Q&A at: http://www.treasury.govt.nz/economy/guarantee/qanda
In fact, this scheme is till being fine tuned. So the details are changed from time to time.
HL
REPLY
Thank you. I hope that the Singapore Government has similar charges and safeguards.
I thought you might be interested to know how the deposit guarantee scheme is being implemented in NZ.
A few points to note:
1) It is a facility where the Crown guarantees people who have deposits with institutions in the scheme. It covers all retail deposits of participating New Zealand-registered banks, and retail deposits by locals in non-bank deposit-taking entities. This would include building societies, credit unions and deposit-taking finance companies.
It only covers deposits and other debt securities.
2) Financial instutions are charged and the charges might be passed on to consumer at the banks' discretion.
For institutions with total retail deposits above $5 billion, a fee of 10 basis points per annum will be charged. This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.
Following changes announced on 22 October 2008, there are also now fees for the new business component of registered banks and non-bank deposit-takers that are not already subject to a fee charge. These institutions whose covered liabilities are under $5 billion will be charged the following fees on the cumulative growth in their book since 12 October 2008 (with an allowance of plus 10 per cent per year on this amount):
- 10 basis points per annum to institutions rated AA minus and above
- 20 basis points per annum to institutions rated A+, A and A minus
- 50 basis points per annum to institutions rated BBB+, BBB and BBB minus
- 100 basis points per annum to institutions rated BB+ and BB
- 300 basis points per annum to institutions rated below BB or are unrated
Growth would be measured, and charged for, monthly.
3) There is a deposit coverage cap of $1 million per depositor per covered institution
4) For non-residents:
The guarantee will cover resident and non-resident holders of debt securities issued by approved New Zealand registered banks.
However, for approved local branches of overseas banks existing on 12 October 2008, the guarantee for non-resident depositors in these branches will be capped at the total amount owed to such depositors at 12 October 2008, allowing for growth of 10 percent per year.
For approved non-bank deposit takers, only debt securities held by New Zealand tax residents or New Zealand citizens will be covered by the guarantee.
In all of the above situations, the deposit coverage cap of $1 million per depositor per covered institution also applies
5) Full set of Q&A at: http://www.treasury.govt.nz/economy/guarantee/qanda
In fact, this scheme is till being fine tuned. So the details are changed from time to time.
HL
REPLY
Thank you. I hope that the Singapore Government has similar charges and safeguards.
Singapore Government guarantees bank deposits
The Singapore Government has guaranteed all bank deposits in Singapore. I think that this is a bad idea. It is putting taxpayers at risk, without any appropriate return.
Here is a possible risk. A foreign bank receives $1 billion of deposits in Singapore. The bank engages in risky trading and lost $1 billion. After deducting its capital, the remaining loss has to be borne by the Singapore Government, actually the taxpayers of Singapore.
The Monetary Authority of Singapore may have ways of monitoring this risk and preventing it. But, can MAS look after the detailed operations of all the banks in Singapore? Do they have the resources and expertise?
Suppose the Singapore Government does not give this guarantee. Some of the money in Singapore will flow to Hong Kong or Malaysia. To keep the money in Singapore, the banks have to offer higher interest rate, maybe 3%, 4% or 5%. This will allow the deposit rate to increase to the market rate, and give the public a better interest rate on their savings. This is a good idea.
If there is a real need to guarantee the deposits, perhaps it should be up to 50% instead of the total sum. Maybe, the bank should pay some guarantee fee to the Singapore Government.
I hope to raise this point to the Singapore Government at an appropriate time, if my views are confirmed to be sensible. I look forward to receive the views of knowledgeable people on this matter.
Here is a possible risk. A foreign bank receives $1 billion of deposits in Singapore. The bank engages in risky trading and lost $1 billion. After deducting its capital, the remaining loss has to be borne by the Singapore Government, actually the taxpayers of Singapore.
The Monetary Authority of Singapore may have ways of monitoring this risk and preventing it. But, can MAS look after the detailed operations of all the banks in Singapore? Do they have the resources and expertise?
Suppose the Singapore Government does not give this guarantee. Some of the money in Singapore will flow to Hong Kong or Malaysia. To keep the money in Singapore, the banks have to offer higher interest rate, maybe 3%, 4% or 5%. This will allow the deposit rate to increase to the market rate, and give the public a better interest rate on their savings. This is a good idea.
If there is a real need to guarantee the deposits, perhaps it should be up to 50% instead of the total sum. Maybe, the bank should pay some guarantee fee to the Singapore Government.
I hope to raise this point to the Singapore Government at an appropriate time, if my views are confirmed to be sensible. I look forward to receive the views of knowledgeable people on this matter.
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