Damage Control Exercise for DBS

ST Nov 12, 2008
DBS overhauls sales tactics
Customers will be asked tough questions before investing, says chairman
By Ignatius Low

SINGAPORE'S largest bank is making big changes to the way it sells investments to customers, as it continues to battle criticism over losses suffered by those who put money into its High Notes 5 product.

DBS Bank plans to ask more detailed questions about a customer's background and how he got the money he is investing. And it will turn away those who are not suitable for a product, even if they insist on buying it.

The bank has drawn flak for arranging and selling structured products that have been rendered worthless by the collapse of American investment bank Lehman Brothers.

Some customers claim that the risks were not explained to them.

All of the above is good stuff. But it fails to address the essence of the problem. And the essence of the problem is the way that the sales staff (not just in DBS, but in other banks too) are rewarded and remunerated.

They are rewarded and remunerated for selling financial products. The more they sell, the better. And if they don't meet the sales quota, they are sacked. Simple as that.

Naturally, the salesperson focuses more on closing the sale, than on whether the product is suitable for a particular client.

It's a little like running a school. The school may have a nice-sounding mission statement which says that it aims to cultivate good character, moral values and all-round development in its students. But if the principal assesses and appraises the teachers mainly by counting the number of A1s that each teacher's students produce, then academic grades will be what the teachers focus on.

Are there any alternative methods, for rewarding the sales staff in banks? Sure. The alternatives aren't new ideas either. Many financial advisory firms use them.

For example, DBS sales staff can be rewarded based on the total amount of investments that their clients continue to maintain with DBS, through that individual salesperson, over the years. This incentivises the salesperson to build a long-term relationship with the client, instead of just trying to close a quick sale and get the commission. This also means that the salesperson will be more careful not to sell inappropriate products which have a higher chance of triggering a dispute with the client later.

Another alternative is to ensure that the percentage of commission/recognition that a salesperson gets for selling a product, does not vary from product to product, but is tied instead to the amount actually invested by the client. Since the salesperson would have no personal vested interest to sell, say, Product A over Product B, he would focus instead of recommending whichever product (A or B) he genuinely thinks is most suitable for a particular client.

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The Little Kiddies And Their Beauty Sleep

Back in 2006, there was a public discussion on whether primary schools should start their day a little later, for example at 8:00 am or 8:30 am, so that kids could get more sleep. (Thanks to my trusty old blog, I actually recall such things).

As far as I know, that discussion never went anywhere. Parents and teachers said a lot about it; a few doctors chirped up about the importance of adequate rest; some principals were interviewed for their opinions; and a few eccentric people even talked about the necessity of the hardship of getting up early as an essential character-building tool. But in the end most primary schools continued to start at the traditional time 7:30 am.

Back to the future. Recently my wife and I attended the orientation programme of my son's primary school (he begins Primary One next year). We learned that while the school officially started at 7:30 am, all the kids were to be in school by 7:10 am sharp.

Why? Because all the kids were to attend a daily 20-minute reading programme, before school officially began. On Mondays, Wednesdays and Fridays, they would read books in English. On Tuesdays and Thursdays they would read books in Mandarin. In addition, the weaker students would be identified. Parent volunteers, pre-screened for their own language competencies, would be around every day, to help the weaker kids with their reading.

So it seems that not only are schools not starting later, some schools are starting earlier.

Personally I don't mind, because our home is quite close to the school and it won't be too difficult to get the kid there on time. The kid probably won't mind either, because he is very fond of reading.

However, it does make me wonder a little about our education system. The Singapore government likes to say that it has high standards, but are the standards high because the system is really good? Or because the students these days are just working harder and harder and harder.

20 minutes per day works out to about seven or eight extra hours per month. This particular school has just managed to create an extra full day, out of the monthly calendar.

Along the same lines, one notes that private tuition centres blossom everywhere in Singapore. Evidently, the formal education system in itself is perceived as inadequate for our students' needs. A high percentage of them look outside their schools, for the additional help they need.

The next time our Education Minister says that Singapore produces so many excellent students because of its world-class education system, perhaps someone should suggest to him an alternative explanation. Singapore produces so many excellent students because of its world-class tuition classes.

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And Then Suddenly The Tide Came In ...

An update on Singapore's casino projects:

ST Nov 8, 2008
Sands gives reassurance
By Lim Wei Chean

THE top suit behind troubled casino operator Las Vegas Sands met the Singapore authorities this week, and yesterday gave a fresh commitment to completing the Marina Bay integrated resort (IR).

Mr Sheldon Adelson, chairman and chief executive officer of Las Vegas Sands, said: 'In the light of recent turmoil in the global markets, I felt the need to personally reaffirm our commitment to the success of Marina Bay Sands. I am pleased to say that the Singapore Government's support of our project remains strong.'

The statement from Las Vegas Sands did not specify whom Mr Adelson had met.

But the consensus among analysts is that if the project were in trouble, the Government would intervene ....

Yes, I think so too. The government has pinned so many of its hopes on the IR projects that it surely wouldn't allow the projects to fail. But it sure would be interesting if we knew what was being discussed behind closed doors. My guess is that in the ultimate worst-case scenario, Temasek Holdings would appear as the gallant white knight, perform its national service and pump in money to save the struggling project.

Even if the Sands project does go ahead successfully and completes on time, one major difficulty is that the tourism and gaming industries are "good times" industries. In bad times, people save their money for the essentials. Holidays and casinos are not essentials.

Which means that if the world heads into a really bad economic patch in the next few years, the IR projects can do little to help Singapore. Few tourists would come and even fewer tourists would gamble.

Sands' reassurances over the future of the Marina IR follows fresh doubts raised by its auditors about the company's ability to continue operating.

In a regulatory filing on Thursday to the United States Securities and Exchange Commission, PricewaterhouseCoopers said the casino operator, which has US$8.8 billion (S$13 billion) in long-term debt at the end of June, would not be able to meet lenders' requirements unless it cuts spending on developments, boosts earnings at its casinos on the Las Vegas strip and raises more capital.

It was also said to be relooking projects under way in Las Vegas, Pennsylvania, Macau and Singapore.

Las Vegas gaming analyst Bill Eadington said the company has lost over 90 per cent of its stock value in 13 months. Flying that close to bottom, the very existence of the company is in question, not just one of its developments, he added.

And that is scary. Especially because of the extent to which the company has borrowed from our three local banks (see below). They would be very badly hit, if the project were to fail.

The Singapore authorities have so far declined to say more. When contacted, the Singapore Tourism Board would only refer to its earlier comment that it was 'in talks' to 'facilitate the success' of the development.

Singapore's banks, OCBC, UOB and DBS, which have significant exposure as lead arrangers for the project, remained optimistic.

About half of the $5.4 billion credit facility for Marina Bay Sands has already been drawn upon, according to UOB Kay Hian's latest report.

OCBC chief executive officer David Conner said the loan is 'ring-fenced' with no exposure to the company's projects in Las Vegas or Macau.

In this context, "ring-fencing" probably means what it usually means, in the context of project finance. That is, the financing is structured such that the lenders are to get repaid out of the cash flows generated by the project (when it's up and running). The cash flows go nowhere else, until the lenders are repaid, and the lenders can look nowhere else except to those cash flows, to get their money back.

This means, of course, that it is essential for the project to succeed in getting up and running. If the project stalls halfway, then the banks would lose big money.

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The Legal Complications of Oral Sex

ST journalist Elena Chong has been covering the crime beat for many years. When I was still a DPP (and that was quite some time ago), she was already an old hand at it. We often had little chats outside the courtroom on the latest 'hot' cases.

For such an experienced journalist, she wrote a rather bad article:

ST Nov 7, 2008
Charged for oral sex
By Elena Chong

A MAN was charged in court on Friday with three charges of having oral sex with his Indonesian maid.

Ahmad Dapon, 53, allegedly engaged in oral sex with the 31-year-old woman in his flat on three occasions between April and May last year.

He is represented by Mr Subhas Anandan.

If convicted, he faces a jail term of up to 10 years and a fine.

The case has been fixed for a pre-trial conference on Nov 25.

Oral or unnatural sex is an offence in Singapore, punishable with a life sentence, or up to ten years jail and/or a fine.

The words in bold are not accurate. They used to be accurate. However, the Penal Code was extensively amended in 2007, and many of Singapore's criminal laws were changed.

Oral sex is no longer an offence in Singapore, unless it is non-consensual or it is between two male persons. Also the penalty is no longer the life sentence, or up to 10 years jail, and/or fine.

So the true picture of Ahmad Dapon's case is more likely to be one of the following scenarios:

(1) Ahmad is charged for non-consensual oral sex with his maid, and under the new section 376. Thus what he faces is actually up to 20 years imprisonment, and fine (no caning, because he's over the age limit);

(2) Ahmad was charged for oral sex under the Penal Code before it was revised (that is, he was charged under the old law) and for some reason the charge against Ahmad has not been amended.

Scenario 2 leaves the DPP, the judge and the defence lawyer with assorted technical questions to sort out. Like, whether you can charge someone for an offence which was an offence at the time he allegedly did it, but has ceased to be an offence by the time the case goes to court; or whether you should amend the charge to the new offence (meaning that you may have to prove certain additional elements - eg the maid's non-consent).

Anyway, here's the point. The ST shouldn't have published this sentence "Oral or unnatural sex is an offence in Singapore, punishable with a life sentence, or up to ten years jail and/or a fine". Because it simply isn't correct. It stopped being correct sometime late last year.

It's OKAY, folks. All you consenting husbands and wives out there, carry on having fun. Consenting girlfriends and boyfriends too.

Errr, I mean consenting girlfriend with consenting boyfriend; or consenting girlfriend with consenting girlfriend; but not boyfriend with boyfriend, whether consenting or not. That's just how the law goes.

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It's Quite Easy To Be On The Front Page & Not Notice It

Apparently, the TODAY newspaper quoted me on its front page, a few days ago. I only saw it myself today - a little bird told me.

And before anyone asks, no, the man with the headgear is not a refugee banker, he's actually Archbishop Nicholas Chia.

They are refugee bankers
Professionals seek to swap Wall Street for Shenton Way
Monday • November 3, 2008
Lin Yanqin

LOST your job at Lehman Brothers? Turfed out in London’s financial crisis? You could always try for a job in Singapore.

And, recruitment firms and headhunters report, this is just what an increasing number of one-time high-flyers from Wall Street and the City of London are thinking.

They say they are seeing a huge rise in the numbers of banking and finance professionals from the United States, Europe and Australia sending in their details — in the hope of getting work here or elsewhere in Asia.

Mr Tim Hird, managing director of Robert Half Singapore, which specialises in recruitment for the finance sector, said that over the last six months, the firm has seen a 300-per-cent increase in resumes. The numbers shot up after the firm launched a website last month dedicated to facilitating recruitment from overseas.

“The Wall Street crisis has definitely attracted more financial professionals from the US to Singapore and Asia,” he said. “In fact, the current economic crisis presents an opportunity for both recruiters and job seekers.”

Companies here are taking this opportunity to recruit financial talent that has been laid off, while candidates are more willing to accept job opportunities that open up to them, he said.

One example is given by blogger Mr Wang, who claims to work in the banking sector. He wrote on his website last month about interviewing a lawyer who worked at the now-collapsed Lehman Brothers investment bank.

“The candidate has seven years of working experience more than me. That makes him very senior. His stated expected salary, however, was quite low (lower than mine). I sensed a little desperation. He’s very eager to grab his wife and kids and get out of London (now populated with unemployed ex-bank employees) and come out to Asia as soon as possible,” Mr Wang wrote.

Ms Andrea Ross, director of recruitment firm Robert Walters Singapore, said that resumes have been flowing in from the UK over the last few months — from candidates who have already been retrenched and from people who fear that they might be.

“We are not seeing as many CVs coming from the US, possibly due to them having to pay taxes both in the US and Singapore. Hence, it does not necessarily work out to be that cost-effective for them as it is for someone coming out from the UK,” she added.

For the rest of the article, click here.

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Church versus State on a Matter of Life & Death

ST Nov 3, 2008
Euthanasia is immoral
Catholic Church condemns practice and urges doctors to reject it as it 'violates medical ethics'.
By Lim Wei Chean

THE head of Singapore's Catholic Church yesterday publicly condemned euthanasia, a topic that has grabbed headlines in recent weeks as the Government considers changes to the laws that govern dying.

Archbishop Nicholas Chia wrote a letter on mercy killings that was read out during Sunday services at the country's 30-plus Catholic churches.

In it, he underlined the Church's views on death, describing euthanasia as 'immoral' and also calling on doctors to reject the practice.

'One cannot choose death and ask to be killed. When they do this, they are not only
committing the crime of suicide, but also compounding it by making another person a partner in a crime,' he wrote.

Health Minister Khaw Boon Wan discussed the issue of euthanasia last month after it was raised in the press.

The Government has not proposed legalising the practice, but has broached the idea of making changes to the Advance Medical Directive, or living will. The document instructs doctors not to artificially prolong the life of a terminally-ill patient with machines. The changes would make it easier for Singaporeans to turn down that care.

Opponents say that is one step on the slippery slope to euthanasia, which the Catholic Church has long considered taboo alongside other controversial practices like abortion.

Archbishop Chia condemned mercy killings in his letter, which was read out All Souls' Day, the annual day of remembering the dead.

This would be rather interesting to watch. My own view? The Catholics can do whatever they like among themselves, but they should leave the non-Catholics out of it.

Of course, in reality, the Catholics will probably seek to block the passing of any new law in Singapore that makes euthanasia more possible for people in general (not just Catholics).

I wonder how many Catholics we have, among our Members of Parliament.

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Money for a Kidney and a Life

A few months ago, I wrote several posts about the possible legalisation of human organ trading. Here's one of my posts.

My view was that it was feasible to legalise such activities. I felt that the organ donors should be entitled to receive payment. I also felt that the payment amount should be fixed by law (and not allowed to operate as a free market), and could be periodically reviewed and revised.

The Singapore government has now announced that it will proceed substantially on those lines.

ST Nov 1, 2008
Kidney law to change
By Salma Khalik

FROM early next year, the law will be changed to allow compensation for live kidney donors.

The amount should not be so large that it's seen as inducement, said Health Minister Khaw Boon Wan when he announced it yesterday.

Both the World Health Organisation and countries like the United States say it is ethical to compensate donors, so they do not suffer for their act of altruism.

Mr Khaw said the amount of compensation is not 'hard wired' into legislations of countries such as the US, Britain and Australia that allow it. Singapore will follow suit.

He hinted that the sum will be at least five figures, and possibly six. The actual amount of just compensation will be left to a committee, which will be set up to look into this.

In the recent organ trading case involving former retail magnate Tang Wee sung, the indonesian donor was to have received $23,700 for his kidney, from the $300,000 Mr Tang paid the agent.

That case sparked a debate on whether it is ethical to pay someone for an organ. Yesterday, Mr Khaw repeated that it is not ethical to do so.

But he added, 'The ethical community, including the World Health Organisation, has clarified that it is ethical to compensate, so long as the compensation amount is not so big as to induce.'

Khaw says that it is not ethical to "pay" someone for an organ. However, he also says that it's ethical to "compensate" someone for an organ ... so long as the amount is "not so big as to induce".

So he tries to change the packaging, but the substance is still the same. "Pay", "compensate", whatever you call it, it's still money. Whether the amount is big enough or not big enough, to "induce", well, those are all highly subjective considerations.

To me, the biggest consideration is the need to save human lives.

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