He said it was understandable that some investors had reacted emotionally as they lost their money in a sudden and unexpected manner, while others felt that the risks had not been adequately explained to them.

But ultimately, the banks do realise that it is in their interest to resolve the matter quickly and not let it drag on, he told reporters in the western Chinese city of Xi'an where he wrapped up his five-day visit to China.

'The banks have what they call reputational risk,' said PM Lee. 'In other words, if you do the right thing, your customers will remember you for a long time.

'If you do the wrong thing, customers and potential customers will remember you for a long time. The banks and financial institutions know this and have every interest in sorting this out expeditiously and fairly.'

In Singapore, about 10,000 retail investors have invested over $500 million into structured products linked to now-bankrupt Lehman Brothers. DBS Bank, Hong Leong Finance and Maybank said last week that they would look into complaints and fast-track vulnerable cases, prompting some investors to worry that they would be left out.

The Prime Minister stressed the notion of fairness repeatedly during his lengthy remarks on the issue yesterday, and added that instances of mis-selling would be investigated.

Mis-selling, at its simplest, means giving the wrong advice to potential investors. Beyond that, it can also mean a failure to help clients diversify their assets, non-disclosure of risks or not completing a proper fact-find to ensure the product being sold suits the customer.

Said PM Lee: 'Where there has been mis-selling, it has to be put right.

'Where there has been less than professional behaviour by the relationship managers, or where things don't measure up to the standards that the Monetary Authority of Singapore (MAS) expects when you promote the financial products, then the banks have to do the right thing.'

The MAS said on Friday that it would look into complaints of mis-selling, and added that an imminent review of the structured-products industry would address such issues as better descriptions and labelling of products, as well as more professionally trained relationship managers.

For products like minibonds, for example, PM Lee suggested that potential investors be given a prospectus that warned upfront and in the simplest language possible that these were not low-risk investments and that there was a chance of losing all their money.

Angry investors in Hong Kong, who claimed they were misled by local banks about the Lehman-backed investment products, have launched repeated street protests in a bid to get their money back. The Hong Kong government subsequently proposed to banks in the territory that they buy back the minibonds from the investors at market price.

The MAS has decided against following Hong Kong's lead, opting instead to ask HSBC Trustee, the trustee for the Minibond programme, to consider other options which might help investors get back some of their money.

PM Lee said he did not want to compare the two approaches as circumstances in Singapore and Hong Kong differed greatly. But he cautioned in general against the pitfalls of a quick fix, saying: 'You may get out of the immediate jam, but then what happens down the road?

'The next time somebody will sell a product and say, 'Don't worry, this goes wrong, the government will look after you.' And then more problems will come.'

The Prime Minister noted that the broader issue was not just about dealing with upset investors, but sending the right signal about Singapore's handling of the financial industry as a whole.

'We have to stand back and say, 'What's the right way to do this? What are the right rules to work with, not just in this situation, but so that everybody will know that these are the rules of the game all the time?'

'That, I think, gives people the reassurance and confidence that we are doing the right thing (now and) in future. Because if people lose confidence in what we are doing, I think the damage to Singapore will be considerable.'

PM Lee returns to Singapore today.

chinhon@sph.com.sg