The Minibond Compensation
DBS, pressured by MAS, is making promises of compensation to the retired and the needy who were “misled” into buying High Notes 5. I am trying to follow the topic as best as I can and the first thing that jumped out to me was that the government is caving in finally to public cries. DBS is also seeing this as an expensive publicity campaign of a people’s bank, something which it never really took on when POSB disappeared and appeared again years ago. It should be in DBS’ strategic interests to woo the public as Singaporeans would surely buy products via DBS and place their deposits there as a result from now on because of the expensive guarantee gestures by DBS. At the very least, DBS would be more stringent on its sales tactics in future as they would not want to repeat this costly buy-back exercise.
The obvious problem now to all is what is fair compensation since DBS might not compensate all, or compensation might not be enough, or compensation might not be in cash even. There will be hordes of minibond customers who would claim that they were misled into thinking that their structured products was as safe as a term deposit. DBS CEO Richard Stanley, who came over from Citigroup China early this year, has dark difficult weeks in front of him. What a tight thin line to balance to compensate and win hearts without digging deep into the purse. DBS shareholders might not be too happy.
The government is expected to use this DBS minibond fiasco as a perfect example that it listens to the people, which is not far from the truth frankly. I’m certain MAS would have stepped in eventually and it is just a matter of when. However, it is difficult to say but they might have acted slower if Tan Kin Lian from TOC had not gone on his song and dance routines at the Speakers’ Corner to lobby and lead a public-spirited cause.