Wednesday, July 14, 2010

Minibond Saga in HK - Role of Democratic Pressures

The following is the news in Reuters on DBS paying compensation to Minibond victims in Hong Kong:

DBS Hong Kong to pay $84 mln in Lehman settlement

PRESS DIGEST - Hong Kong - July 14

DBS Group Holdings Limited
4:05pm GMT+0800
HONG KONG | Wed Jul 14, 2010 5:13am EDT
July 14 (Reuters) - DBS Hong Kong, a unit of Singapore's DBS Group Holdings (DBSM.SI), will pay out a combined HK$651 million ($84 million) to some buyers of Lehman Brothers constellation notes, the territory's financial regulator said on Wednesday.

Customers classified by the bank as having a low to medium risk profile would receive their money returned plus interest that would have been payable had it been placed in a fixed-term deposit, Hong Kong's Securities and Futures Commission said in a statement.

Investors in Singapore, Hong Kong and Indonesia who bought the product had lost their money after the U.S. investment bank Lehman Brothers went under in 2008.

The constellation notes are credit-linked notes related to the collapsed U.S. bank. (Reporting by Kelvin Soh; Editing by Chris Lewis)

I have played a very small role in this Minibond Saga, both in Singapore and Hong Kong. But I am very glad that the Hong Kong Victims have finally get at least 60% to 70% compensation from the banks and financial institutions.

This is especially an important lesson for Singaporeans to understand how TRUE DEMOCRACY could work to their advantages in times of such crisis. The Hong Kongers have put great pressures on its government to make good of a settlement for the Minibond saga. This could only be possible with the help and pressure exerted by the Pan-Democratic Legislative Councilors (equivalent to our MPs in parliament) through the various hearings conducted by the Legco.

In Singapore, the government would prefer to protect the interests of the banks and financial institutions in such an ultra-capitalist manner basically because the government itself holds substantial shares in most of the local financial banks and institutions. It would be difficult for the government to be a good referee (i.e. regulator) as well as the main players (shareholders of these institutions). Naturally, the interests of investors would be compromised in the process.

This situation is further worsen by the fact that there is a lack of true checks and balances in parliament. In HK's case, the Legco enforce an equivalent of "Commission of Inquiry" to get civil servants from the Finance ministry as well as chiefs of those banking institutions to be questioned thoroughly. Such pressure has finally paid off by a reasonable settlement being made by getting the institutions to compensate up to 60% to 70% to their investors.

In great contrast, Singapore Minibond victims are left to their own peril. Whatever little effort the MAS puts up, the settlement is a sham which favors heavily to the financial institutions, with compensations as little as 10% only. The only consolation is that Great Eastern has willingly put up 100% compensation to its investors.

But we cannot trust and depend on the magnanimous acts of these institutions. We must have a system which could balance the interests of the masses vs the capitalists. We should not have a government that will face conflict of interests in this case, to act responsibly and fairly.

It is an important lesson of the Democracy for all of us. You will not realize the importance of Democracy unless you need it.

1 comment:

soojenn said...

This is HK for you... however, the people work towards this. In Singapore, the PAP has "brainwashed" Singaporeans over 50 years to become "ignorant' as LKY has just put it, and believe that the PAP government knows what is best, inspite of the many fallicies.