SINGAPORE: How did DBS Bank ever get itself into such a mess?

As chief protagonist in the ongoing High Notes saga, the bank is bearing the brunt of angry investors looking to recoup their investments in failed Lehman-linked products.

In total, some 2,400 people who bought High Notes from DBS are affected; including many first-time investors.

While no exact figures are available, it is understood that the number of investors who bought Lehman-linked products from the brokerage arms of United Overseas Bank and OCBC Bank are relatively smaller.

No one can accuse DBS of being reckless. A year ago, none could have foresee the collapse of Lehman Brothers, one of the oldest names on Wall Street.

And most, if not all, banks now offer structured products with similar risk profiles.

As one industry commentator explained: “One of the big things for banks in recent years is the selling of financial products to their fixed-deposit customers. This helps to diversify their revenue from just lending and they can also earn fees without committing loans.”

In this case, he added, DBS was “just unlucky”.

Taking a step back from the emotionally-charged appeals by investors looking to recoup their investments, one might wonder: Was DBS at greater risk of being caught in such a situation?

Some argue that DBS may have been a victim of its own success. Its acquisition of POSB - dubbed the people’s bank - a decade ago earned DBS a special standing among Singaporeans.

Commercially, the bank gained a three-million-strong base of retail depositors, the largest here, and one which is the envy of its rivals.

On top of this, says The Asian Banker’s editor-in-chief Emmanuel David, the amount which DBS’ customers tuck away in their fixed deposits is on average 30 per cent higher than its rivals.

As with any other bank, DBS must have wanted to tap these idle funds - the largest pool among the industry here - to generate fee-based income.

According to some customers with fixed deposits at all three local banks, the DBS sales team was one of the most “aggressive”. And between mid-2007 and early this year - according to industry sources - DBS made further moves to boost its sales force. It was during this time that the Lehman-linked products came on to the market.

The rest, as they say, is history. Now, DBS not only has to resolve this High Notes saga but also repair the damage done to its standing among Singaporeans.

Although many, including the Prime Minister, have stressed the need for investors to take “personal responsibility” for their actions - provided no mis-selling is involved - there are some who, rightly or wrongly, expect DBS to “take care of the people”.

The reality, said one industry observer, is that “DBS will never be seen as a fully commercial bank”. “Although the privileges accorded to POSB have been removed, DBS is still seen as the Government’s bank and the people’s bank ... customers expect a higher degree of social responsibility.” - TODAY/sh