Private banks to disclose fees, rebates amid bond furor

Motorists stop at a junction as the Raffles Place financial business district is seen in Singapore on Sept 27, 2016.
Motorists stop at a junction as the Raffles Place financial business district is seen in Singapore on Sept 27, 2016.PHOTO: AFP

Tougher standards are being brought in at private banks to ensure greater transparency around the fees and rebates they might reap from selling bonds to clients.

The Private Banking Code of Conduct (PB Code) previously asked private banks to inform clients of any conflicts of interest.

The banks must now make specific disclosures on bond rebates, which broadly refer to the financial incentives that some issuers give to financial institutions such as private banks for selling their bonds.

The rule change for rebate disclosure was implemented on Oct 1 but officially announced only yesterday along with other amendments the Association of Banks in Singapore (ABS) will be making to the code.

More changes will kick in by March 31. These include new standards asking private banks to disclose quantifiable benefits - such as rebates and commissions - and to provide clients with a fee schedule, which is a table detailing fees charged on a product or service.

The PB Code, launched in 2011, is not mandatory, but the standards serve as a benchmark for private banks and their employees.

The new amendments came in the wake of a number of corporate bond defaults since last year - including Swissco Holdings, which filed for judicial management this week.

Many bond investors claim that their relationship managers at private banks pushed vulnerable bonds to consumers in order to receive kickbacks from issuers.

Industry figures welcomed the ABS amendments yesterday, with DBS head of consumer banking and wealth management Tan Su Shan calling them "a move in the right direction".

"For Singapore to continue to build a sustainable and strong wealth management hub here, it is important for industry players and stakeholders to continue to evolve and enhance these standards," said Ms Tan, also co-chairman of the private banking industry group at the Monetary Authority of Singapore.

Bank of Singapore global products head Marc Van de Walle said: "These enhanced standards serve to safeguard the integrity and reputation of Singapore's financial system."

Meanwhile, MAS is looking at ways to enhance the regulatory framework of the bond market, including offering a choice for investors to opt out of their accredited investor status. Only an accredited investor can be sold wholesale corporate bonds.

But the regulators have repeatedly stressed that investors must also be responsible for assessing the investment risk and to build a diversified portfolio to minimise potential losses.

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A version of this article appeared in the print edition of The Straits Times on November 23, 2016, with the headline 'Banks required to disclose rebates amid bond defaults'. Print Edition | Subscribe