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.