| |
| |
 |
| |
|
| |
|
| |
|
SINGAPORE: Structured products offered in future will be simple and less sophisticated.
Industry watchers said that's how financial institutions will package such products, following the Lehman Brothers minibond scandal.
To date, the Monetary Authority of Singapore (MAS) has allowed nine out of the 10 financial institutions to resume selling structured products after a ban of between six months and one year.
On Tuesday, the central bank lifted the ban on six brokerages to allow them to resume the sale of structured products.
Only one, Hong Leong Finance, still faces a two-year ban from selling structured products.
But it had said previously it would not sell such products again.
Many investors who bought structured notes lost money when Lehman Brothers collapsed about two years ago.
After the incident, financial institutions strengthened processes and improved policies.
Industry watchers said institutions will now thread carefully when offering structured products.
"You're not going to see very difficult-to-understand products, it'll not have many layers of opacity where people can never comprehend what the underlying risks are," Singapore Management University, dean, executive and professional education, Annie Koh said.
"So you're going to see more equity-linked, maybe a few currency-linked and perhaps a dual deposit, dual-currency deposit structure
"In the past, if you say (the magic word) minibond, it sounded like just a simple bond but it was having many layers of complexity and for a simple investor, that could not be suitable at all," associate professor Koh said.
Despite simpler products, observers said investors should not be too quick to sign up for them.
"This is not the end of it all. Don't tell yourself in the future, it will not happen," Securities Investors Association (Singapore) president & CEO David Gerald said.
"It may happen because you don't understand the nature of the product. In a structured product, there are many layers of complexities.
"So first of all, understand the features, understand the risk, then ask yourself is this the product for me, because my risk appetite must suit the product and you really need to spend time.
"Don't sign any documents then and there. Go home; think about it; seek advice," Mr Gerald said.
Equipping investors with knowledge is also key.
"The Association of Banks will increase the education of customers and we're also penetrating universities (and) polytechnics," The Association of Banks in Singapore director Ong-Ang Ai Boon.
"These are potential investors of bank investment products or financial products and we're also penetrating offices for the workers to be constantly aware of the risks that are in products.
"And yet with this risk, they can increase the value of their funds and they need not be afraid of these products if they know how to ask the right questions and they're aware of their risk profiles, they're aware of their need for their money for the future," she said.
Despite the minibond saga, observers said it's not realistic to ban the sale of structured products completely.
As a financial hub, foreign and local investors would in fact demand for such products.
But industry watchers said the key difference is that the financial institutions will be more cautious in rolling out structured products and be more careful to whom they sell it to.
-CNA/wk
|
