Mr Tan,
I hope to solicit your comment on the forum titled “why not fines?” (ST forum 6 August 2010) for DBS service breakdown. I read with curiosity and I have some questions:
(a) Why there is no fine? Does it mean that the terms and conditions already provide covering for DBS for such service down time event? Maybe, as a result, MAS can only issue warning? Why there is a discrepancy in the treatment of structured notes where there is specific provision in the statute for mis-selling and MAS did not conduct independent investigation to individual cases? Is this a double standard in the handling of structured notes and this computer glitch? Have we over-blown the engineers error, while keeping silent when immoral act could have occurred in a large scale?
(b) MAS punished DBS by requiring to “set aside additional $230m against operational risks” (ST 5 August 2010). What is the meaning of this punishment? Who is entrusted to have oversight how this $230m is to be disbursed and accounted for? Who will ensure that DBS will not buy computers and charge the disbursement to this fund, hypothetically speaking? Who will have oversight that the fund spent benefit consumers specifically?
(c) What is the real accounting entry for setting up such a fund in response to the “punishment”? I guess it would be debit “fund for operational risk” and credit “retained earnings”. If there were the case, there will be no effect to the income statement of DBS and will have minimum impact to DBS. As such, this “punishment” may look more like an exercise of “journal entry”. I think MAS may have unintentionally sent a wrong impression on its resolve in dispensing this punishment.
From Cashew Nut
http://www.straitstimes.com/STForum/Story/STIStory_562625.html
My view
I am not clear about the purpose of the "punishment" meted to DBS. By asking DBS to increase its capital, it does not really affect the bottom line. Anyway, it is likely that DBS already had more than sufficient capital to meet the "punishment".
Anyway, I do not think that DBS merits any punishment. They might have slackened and caused some inconvenience to its customers, but it was not deliberate. They have probably suffered a bad reputation already.
Thursday, August 5, 2010
Pick the right stocks
Picking the right stock is a matter of practice and experience. Do you know how to read the trend of the market? The price of any stock is supposed to reflect all the available information. But, experience shows that certain indicators may influence the market for a period of time, before it is moved to other indicators.
But, where can you acquire the practice and experience, if you do not have the chance to manage a portfolio? You can practice with this simulation game. It is built to be realistic and reflect the real world. But, to acquire the skill, you have to practice and practice.
http://tankinlian.com/admin/file.aspx?id=112
After reading the Guide, you can go to www.easysearch.sg and click on Pro-Investor.
Tan Kin Lian
But, where can you acquire the practice and experience, if you do not have the chance to manage a portfolio? You can practice with this simulation game. It is built to be realistic and reflect the real world. But, to acquire the skill, you have to practice and practice.
http://tankinlian.com/admin/file.aspx?id=112
After reading the Guide, you can go to www.easysearch.sg and click on Pro-Investor.
Tan Kin Lian
TKL Website - visitors
I received 640 visitors to my TKL website yesterday. It was a big jump, compared to an average of 300 during the past few days. The website has only been revamped for about three weeks. My previous website received only about 20 visitors a day.
The new website is based on a new structure, which I describe as "document centric". I believe that it is more useful to the public, compared to the HTML centric structure of most websites. The popular tabs are "Ask Mr. Tan", "Latest" and "Information".
I am keen to market my website structure to large organisations and government agencies that have many interactions with the public. Details are found in my website, under the category called "Consultancy".
www.tankinlian.com
Consultancy
http://tankinlian.com/Information.aspx?CatID=1
Tan Kin Lian
The new website is based on a new structure, which I describe as "document centric". I believe that it is more useful to the public, compared to the HTML centric structure of most websites. The popular tabs are "Ask Mr. Tan", "Latest" and "Information".
I am keen to market my website structure to large organisations and government agencies that have many interactions with the public. Details are found in my website, under the category called "Consultancy".
www.tankinlian.com
Consultancy
http://tankinlian.com/Information.aspx?CatID=1
Tan Kin Lian
US Presidential Citizen's Award
Read this article from the White House.
My view
Singapore has a similar award for citizens for National Day. Perhaps, we can make the award as exciting as the USA?
My view
Singapore has a similar award for citizens for National Day. Perhaps, we can make the award as exciting as the USA?
Invest in Bonds - SGX
SGX launches initiatives to enhance listing, trading of fixed income products
By Jonathan Peeris | Posted: 05 August 2010 1131 hrs
By Jonathan Peeris | Posted: 05 August 2010 1131 hrs
 | ||||||
 SGX Exchange | ||||||
SINGAPORE : Singapore Exchange (SGX) has launched its first initiatives to enhance the listing, trading and distribution of fixed income products to build a more vibrant bond market in Asia.
These initiatives include drawing more Singapore-listed companies and other organisations to issue bonds for listing and trading on SGX.
The listing and trading of fixed income securities such as preference shares and convertible bonds will also be encouraged.
SGX also plans to halve the time taken to approve bond listings by streamlining the processes involved.
By the first quarter of next year, SGX expects to offer an on-exchange secondary market for individual and institutional investors to trade Singapore Government Securities (SGS).
SGX's Central Depository has been a custodian of individual investors' SGS holdings since April 1 this year.
A total of 1,229 bonds are currently listed on SGX.
In fiscal year 2010, 200 bonds were listed involving programmes to raise over S$100 billion.
SGX has also appointed Ms Tng Kwee Lian, formerly from UOB Asset Management, as Senior Vice President and Head of Fixed Income to drive the promotion of bond trading to high net worth and individual investors.
President of SGX Gan Seow Ann said SGX offers an unparalleled value proposition to issuers and investors of bonds.
That's because issuers can leverage on SGX's international distribution platform while market participants will have access to one of the world's leading trading venues.
- CNA/il
These initiatives include drawing more Singapore-listed companies and other organisations to issue bonds for listing and trading on SGX.
The listing and trading of fixed income securities such as preference shares and convertible bonds will also be encouraged.
SGX also plans to halve the time taken to approve bond listings by streamlining the processes involved.
By the first quarter of next year, SGX expects to offer an on-exchange secondary market for individual and institutional investors to trade Singapore Government Securities (SGS).
SGX's Central Depository has been a custodian of individual investors' SGS holdings since April 1 this year.
A total of 1,229 bonds are currently listed on SGX.
In fiscal year 2010, 200 bonds were listed involving programmes to raise over S$100 billion.
SGX has also appointed Ms Tng Kwee Lian, formerly from UOB Asset Management, as Senior Vice President and Head of Fixed Income to drive the promotion of bond trading to high net worth and individual investors.
President of SGX Gan Seow Ann said SGX offers an unparalleled value proposition to issuers and investors of bonds.
That's because issuers can leverage on SGX's international distribution platform while market participants will have access to one of the world's leading trading venues.
- CNA/il
Life insurance sales
Life insurance sales saw a rapid growth during the first six months of 2010.
http://www.businesstimes.com.sg/sub/news/story/0,4574,398392,00.html
http://www.businesstimes.com.sg/sub/news/story/0,4574,398392,00.html
Blatant cheating
Mr. Tan,
In your earlier blog, you mention that a life insurance company have a deduction of 50% of the accumulated premium. Which company is this? What is the significance of this 50%? What is a fair amount of deduction?
REPLY
The insurance company is a foreign company and the policy is investment-linked. When you buy a life insurance policy, you are entitled to receive a benefit illustration that discloses certain information about the product. You should look for the following information:
In your earlier blog, you mention that a life insurance company have a deduction of 50% of the accumulated premium. Which company is this? What is the significance of this 50%? What is a fair amount of deduction?
REPLY
The insurance company is a foreign company and the policy is investment-linked. When you buy a life insurance policy, you are entitled to receive a benefit illustration that discloses certain information about the product. You should look for the following information:
- value of accumulated premiums - this is the amount that your premiums will accumulate to the maturity date, based on the assumed interest rate (3.75% or 5.25% or 9%)
- effect of deduction - amount that is deducted from your accumulated premium to pay the cash value to you
In my book, Practical Guide to Financial Planning, I have given the benchmark on the amount that should be deducted from you and the balance that should be paid to you. For a 25 year policy, the maximum deduction should be 20% to cover the expenses of providing the life insurance protection (less than 10%) and the cost of investing the funds.
Most life insurance policy take away 35%, which I consider to be too high. For the specific policy mentioned above, the deduction is 50%, which I consider to be "blatant cheating". Imagine - if you work hard and save prudently for 25 years and the accumulated savings should be $500,000, do you like to see $250,000 taken away from you? Many people are not aware about this excessive deduction and would not have been willing to pay so much, if they knew.
I will try my best to educate consumers in my blog and in my website, www.tankinlian.com. It is important for consumers to be educated on financial matters through my book and by attending the educational talks conducted monthly by FISCA, www.fisca.sg.
If an insurance agent approaches you to buy a life insurance policy, you should be careful. Read my FAQ on "marketed financial products" here, www.tankinlian.com/ask.aspx. The same tip applies to any financial product that is being marketed to you, such as land banking, structured products and properties.
Tan Kin Lian
Stamping a contract
Someone write to the Straits Times to complain about paying $25 to the Post Office as handling fee to stamp a contract? I was surprised. It seemed to be excessive. I wish to check the facts. Is this correct?
Read here.
If this is correct, here are a few issues:
Read here.
If this is correct, here are a few issues:
- What is the cost to the Post Office to provide this service? If a commuter pays $2 for a train ride, surely the work involved in the Post Office to handle the stamping is much lower?
- Is there a choice for commuters to stamp the contract through other channels, instead of the Post Office?
- Is this abuse of monopolistic power? What is the role of the Competition Commission on such matter?
- This seems to be adding to the cost of living and the cost of doing business
Tan Kin Lian
Invest in Bonds
I have written a FAQ Mr. Tan on investing in government and corporate bonds in Singapore.
www.tankinlian.com (Ask Mr. Tan)
www.tankinlian.com (Ask Mr. Tan)
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