Submitted by Richard Woo
Maybe the refund, in full, by distributors, can be made on the condition, and mutually agreed with the investors, that it is put back on fixed deposit with the distributor, for example:
Refund by ABN [RBS] to go back on fixed deposit with RBS, refund by Maybank to go back on fixed deposit with Maybank, and so on.
Since investors had agreed to a waiting period of about 5 years to get their principal back, under the original terms of the investment, it may not sound unreasonable for distributors to suggest that the term of the deposits should be somewhere from, say, 3 to 5 years. The rate of interest payable on such deposits can be something “reasonable” and mutually agreed between the investors and the distributor/bank concerned. Such an arrangement may be beneficial to some extent to both sides.
For the banks/financial institutions, no cash outlay is involved, at least not before the maturity date of the deposits [and this also does not mean the holders of the deposits will withdraw all the funds on maturity], and it should be borne in mind that perhaps a large part of the funds used by investors in the purchase of the product could have emanated from external sources, e.g. accounts maintained with other banks/institutions.
Litigation may end up with bigger losses for one side or the other and in such a scenario any goodwill there is will be lost, presumably, for good. Investors should be accorded a settlement that would restore confidence in the banking/financial industry; any proposal for settlement that leaves a bitter taste in the mouth is, obviously, not something to be considered. Banks and the other institutions have to think long term and their reputation and future business interests may largely depend on the actions they take now.
Maybe, as an exception, these banks/financial institutions deserve special treatment in accounting procedures; maybe they should be accorded, by the authorities concerned, the option as to how they intend to write off the losses, for example, whether in one fell swoop or over a period of several years, starting, say, from the time when these deposits start to mature or when funds from them are being released. As can be seen, and if I am not wrong, such an arrangement would entail mainly book entries and “cash” is involved only much later. Their balance sheets may in fact take on a healthy glow. But I have to admit I could be wrong. If so, please point out.
Richard Woo
