Friday, October 31, 2008

Press Release from High Notes Investor Group.

They have a blog :

These people are making a case, one which I said is a very logical case:

1. DBS High Notes where so risky they were simply very bad products with a very high risk of failure.
2. This high risk of failure was not communicated to investors of this product which is clearly unsuitable for ordinary folks.
3. Instead of case by case assessment, DBS should consider a collective settlement.

DBS clearly packaged a bad product and sold it to people who shouldn't be buying it. DBS should do the right thing and work out an acceptable compensation for these people.
High Notes Investor Group - Press release 30 Oct 08
1. On Thursday 30th October 2008, in response to a petition by the High Notes Investor Group (HNIG), DBS met up with approximately 400 investors of their DBS High Notes 5 (HN5)
product in two separate sessions. Session 1 started at 2.00pm and Session 2 was at 5.00pm.
2. Both sessions were originally scheduled to last one hour, but eventually ran for more than two and a half hours each time.
3 Many attendees urged DBS to treat all investors as a group rather than go through a case-by-case process on the subject of compensation.
4.To buttress the above argument, the HNIG revealed at the forum that they had requested an industry insider who has experience structuring such products to go through the HN5 pricing statement. After a six-hour preliminary analysis of both the document as well as the real-life experiences of investors, it would seem that in HN5, there appears to be SYSTEMIC Failure on three fronts:
a) Failure in the PRODUCT
i) Product was arranged, issued and sold by DBS
ii) Product was leveraged on Credit Default Swaps
iii) Product was secured on CDOs
b) Failure in the SALES PROCESS
i) Product was sold through a large sales force who were inadequately trained, and
ii) Relationship managers who were and are still not familiar with HN5 and customer’s suitability
i) HN5 was sold to inappropriate customers
ii) HN5 was targeted at customers with little or no knowledge of financial concepts like CDS, CDOs, and Leverage
Because of the failures in the product itself, we are asking DBS to undertake compensation in a blanket or collective manner, and not on a case-by-case basis.
5. DBS was also questioned on the issue of RISK MANAGEMENT – there appears to have been serious lapses in this area that has resulted in a detrimental impact on the customers of HN5.
6. In response to questioning, Mr Rajan Raju, Head of Consumer Banking admitted that the HN5 is “NOT a low risk product”. Further, in response to a pointed question on the actual risks inherent in HN5, Ms Frances Chan, Senior Vice-President revealed that, on a scale of 1 to 10, the HN5 product was a “8 to 9”. We feel that a risk factor as high as this is in no way commensurate with the relatively low returns from HN5 and a locked-in period of 5.5 years. This bolsters our argument of the presence of a Systemic Failure in HN5.
Other Highlights
7. One attendee questioned the rationale for GIC to pump billions of dollars of government reserves into UBS and Citigroup to bail out foreigners while a government-linked bank like DBS is being parsimonious in compensating its customers in a cut-and-dried case of mis-selling and misrepresentation.
8. Many attendees highlighted their long-standing relationships with POSB/DBS, some stretching over a period of more than 30 years. They expressed a deeply felt sense of betrayal by DBS which they said violated their trust in the bank. Many also spoke of their past willingness to buy products from DBS because they saw it as “the national bank” they could have complete trust in.
9. There were detailed questioning on DBS’s ability and competence in giving timely advice on the status of HN5. Attendees referred specifically to a letter dated 31 March 2008 which had actually advised DBS customers to hold HN5 to maturity.
10. At least one attendee made the point that the overall mishandling by DBS of its affected customers will result in an eventual pulling-out of funds from DBS to its competitor banks, with a concomitant negative impact on its share price. The latter had already fallen drastically in recent weeks, a phenomenon which most analysts attributed partly to the fallout from its High Notes 5 debacle.
11. The immediate post-forum reaction of most attendees is that the Thursday sessions have not moved the complaint nor the compensation processes forward in any significant manner. In comments to HNIG, many people expressed the doubt that if DBS had sold HN5 in an irresponsible manner to make money, how seriously could they be taken when they are now in a damage control mode. The basis for such comments arises from bruising encounters customers have had with DBS’s Investor Care personnel in interview sessions where sometimes three to four staffers question a lone customer.
Others felt that DBS in referring Relationship Managers to the Monetary Authority of Singapore (MAS) is missing an important point - in the words of one DBS customer, “If the RM doesn’t know what he is doing, if he is set impossible targets, and if he is rewarded based on commissions, whose fault is it? DBS must teach RMs first”.
12. HNIG is a group of DBS High Notes (HN) investors that has been formed to communicate with DBS and undertake relevant collective actions where and when necessary.
13. HNIG currently has about 300 investors in our contact list and these consist of investors of various HNs. More joined during the dialogue sessions yesterday. HNIG handed out leaflets to request HN investors to turn up at 4.30pm on Saturday 1 November 2008 at Hong Lim Park (Clarke Quay MRT station).
14. For any clarifications, please contact Our blog can be found at


Harry Lee said...

From this incident, you can tell the difference between Singaporean and Hongkee.

Hongkees have survival capability which allows them to fight for themselves in dire circumstances. Singaporeans are lacking in this aspect. They don't know what to do, they're just following the crowd.

Even MAS also doesn't know what to do and trying to wash it's hands off the matter. Everyone is trying to wash their hands off and investors hasn't the skill to fight back.

Singapore is a great place to live but there is no free ride in this world. You have it at the expense of survival skills.

Anonymous said...

harry lee you are so right. Most Sporeans are like sheep, thanks to decades of iron fisted rule by the despot. But this HNIG is doing something in the right direction.

Anonymous said...

Dear HNIG,

I am attaching two press releases made by DBS in August 2007. Just ask them point blank what their Risk Management did around this time to safeguard its shareholders interest and how come they were apparently not terminating the sale of the HN series to the now clearly less knowledgeable retail customer when it was apparent that the targetted assets were toxic.
SINGAPORE , 27 August 2007 - Following our announcement of 7 August 2007, DBS would like to provide an update on its exposure to collateralised debt obligations (CDOs), including its exposure to a SGD1.4 billion asset-backed commercial paper (ABCP) conduit called Red Orchid Secured Assets (ROSA).

As previously disclosed on 7 August, DBS had distributed USD 1.7 billion (SGD 2.6 billion) of structured products involving CDOs backed by AAA/AA rated collateral to third-party customers. This amount includes SGD 1.1 billion of CDOs held by ROSA . Most of the
SGD 1.1 billion CDO assets in ROSA are rated AAA. We do not expect these assets to default.

We initially did not include ROSA as part of DBS' own exposure to CDOs on the assumption that ROSA would continue to be funded by investors. Following the market volatility in recent weeks, some ABCP conduits, including ROSA , have had to draw on liquidity facilities provided by banks. ROSA's total assets of SGD 1.4 billion can be fully funded by a liquidity facility provided by DBS Bank.

DBS' CDOs in ROSA are not directly exposed to the US sub-prime mortgage market. In addition, DBS does not have any other asset backed commercial paper conduit which invests in CDOs.

DBS Group Chief Financial Officer Jeanette Wong said: "DBS has one of the strongest capital positions of banks operating in Asia and we have minimal exposure to the US sub-prime mortgage market.”

Not all CDOs are exposed to the US sub-prime mortgage market. CDOs are debt obligations backed by assets. These assets can consist of bonds, loans and their derivatives and can include corporate loans, high-grade mortgages, sub-prime mortgages, car loans etc. Each CDO is different in terms of its percentage exposure to each of the different asset classes. Hence exposure to CDOs does not automatically equate with exposure to the US sub-prime mortgage market – it depends on what the CDO underlying assets are.

Ms Wong added: “Of our total SGD 2.4 billion holdings in CDOs, only 12% directly references some exposure to US sub-prime mortgages. We previously disclosed that this exposure is about USD 188 million (or SGD 288 million) and there has been no change to our US sub-prime mortgage exposure.

“We are comfortable with our present position and as always will monitor our risks closely. Our total CDO exposures make up only 1% of our overall assets with over 70% of this amount concentrated in the high quality AAA/AA+ space."

CDO exposure as at 7 August
CDO exposure as at 27 August


DBS Bank

Red Orchid Secured Assets
( ROSA )
0.7bn *
1.1bn *

DBS Bank's total exposure

Third-party product sales, of which:

0.7bn ^
1.1bn ^

– Others

DBS Asset Management (as collateral manager)

DBS Bank's total exposure to
US sub-prime mortgage CDOs
188 m
288 m
188 m
288 m

* Assuming conservatively 100% liquidity funding by DBS Bank
^ Assuming 100% commercial paper funding by investors

SINGAPORE , 7 August 2007 - In response to queries from investors and the press, DBS Asset Management, a 100%-owned subsidiary of DBS Bank, disclosed that it manages two CDO portfolios with underlying assets totaling USD 1.03 billion. Neither CDO has underlying assets with exposure to US sub-prime mortgages.

DBS Bank has also distributed USD 1.7 billion of structured products involving CDOs backed by AA or AAA rated collateral to institutional, private banking and sophisticated or knowledgeable retail investors. None of these products have exposure to US sub-prime mortgages.

As disclosed earlier last week, DBS Bank said it had investments in collateralised debt obligations (CDOs), including collateralised loan obligations (CLOs), amounting to approximately USD 850 million. The rating profile of the portfolio comprises 15% in AAA, 30% in AA and 55% in A. Of the total portfolio, 22% or USD 188 million are in asset-backed securities (ABS). These ABS CDOs have a diversified portfolio of underlying high grade and mezzanine assets, including a portion of US sub-prime mortgages. DBS' exposure to these ABS CDOs is through A, AA or AAA tranches.

As part of its risk management processes, DBS Bank continues to carefully monitor its CDO/CLO portfolio and is comfortable with its positions. DBS intends to hold the CDO portfolio until maturity and does not expect any losses to have a material impact on earnings or capital.

ari said...

please how can we start a class action!! a number of investors were sold the platinum all weather fund thru banks like united overseas bank or others in singapore it turns out these were out and out fraud linked to maddof!! what can we do to get started lets make contact!! please help us!!! thanks

Anonymous said...

There seems to be a lot of derivatives related litigations in the last two years.

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