MAS wants to focus on helping vulnerable investors

MAS wants to focus on helping vulnerable investors
By Wong Siew Ying, Channel NewsAsia | Posted: 17 October 2008 2335 hrs

SINGAPORE: Singapore's central bank has not ruled out buying back minibonds linked to failed investment bank, Lehman Brothers.

But the Monetary Authority of Singapore (MAS) said its focus is to help "vulnerable customers".

Many investors have asked for a replacement to take on Lehman's role in the minibond programme and they should know if such a replacement can be found by the end of next week.

If no replacement comes along, the assets could be sold so that investors could be paid. It is, however, unclear how much investors would be getting back. This has understandably caused some frustration among Singaporeans.

MAS said it is now investigating the matter and could not offer more details. But it added that the probe will look into allegations that financial institutions (FIs) have breached laws or have inadequate internal controls or poor sales practices.

Heng Swee Keat, managing director, MAS, said: "For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor's profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility in such cases."

This could mean that the banks may have to compensate some investors if evidence proved that the products were mis-sold.

Although thousands have been affected, MAS is more concerned about investors who are most vulnerable, such as retirees above 55 years old, those who are less educated, and first-time investors.

The central bank is also reviewing its regulatory framework to cope with the changing global investment environment.


- CNA/so

Comments: With the MAS moving to guarantee deposits earlier in the week, it seems like preparations are being made to help those investors badly impacted by the Lehman Bonds (and related issues) crises. Although I suspect that the deposit guarantees are primarily to ensure that capital does not flow out of Singapore to other countries, this move might also have been put in place to ensure no panic in the marketplace (ie a run on the banks) should MAS have to step in and arbitrate on the issue. This would however still translate to a cost to the various banks and although some figures have been bandied to date, no one is entirely certain as to the extent of the cost both to the investors and to the banks involved should some sort of arbitration occur. In HK for eg, investors felt that the reimbursement should be made in full, vs the market realised value proposed. Personally I would go short on the banks during this period of uncertainty.