Martin Lee @ Sg
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DBS High Notes 5 Compensation

DBS just released an announcement on their compensation offer for investors affected by the bankruptcy of Lehman Brothers.

Since the collapse of Lehman Brothers on 15 September, we have been deeply concerned about DBS customers in Singapore and Hong Kong who have invested in structured products with Lehman as a reference entity and understand the anguish they are facing. When DBS first distributed these products over 18 months ago, the global financial landscape was very different. Nobody could have imagined the extent of the fallout from the US sub-prime crisis, or the collapse of a venerable 158-year-old financial institution like Lehman and the toll this would take on investors.

DBS CEO Richard Stanley said: “I am deeply concerned about the anguish our customers are experiencing. DBS is committed to doing the right thing and my colleagues and I are working as hard as possible to resolve the situation. Every customer is important to us and in cases where our standards are not met, DBS will not hesitate to make cash compensation.”

These products were sold to 4700 customers in Singapore and Hong Kong who invested a total of SGD 360 million. In Singapore specifically, 1400 DBS customers invested a total of S$103 million in High Notes 5. Of these customers, two thirds are from DBS Treasures, which caters to customers with a minimum of $200,000 cash and/or investments, and 80% are below age 60. We will give every single case individual attention and hearing. We agree with MAS on the need to give priority to vulnerable customers and are fast-tracking such cases.

As a matter of policy, we do not discuss individual cases. However, to-date we have found that a number of cases did not meet the standards DBS upholds and the Bank will be compensating these customers with effect from tomorrow. Based on the number of cases we’ve reviewed, we estimate that the total customer compensation in Singapore and Hong Kong will be in the range of SGD 70-80 million.

The unwinding process of the products is currently underway. Regrettably, our initial expectation of the worst-case scenario whereby investors will lose their entire principal investment amount is likely to materialise. DBS will not gain from this process and the Bank will make a final announcement next week when the final credit redemption amount, based on prevailing market conditions, is determined.

We will continue to work closely with the MAS to ensure that all cases are handled in a prompt and comprehensive manner.

Thank you.

Group Strategic Marketing & Communications
DBS Bank

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