lOOks  lIke

The SiNGAPORE

fInancIal  flOOd

at  DBS

A ‘proportionate’ penalty  ... cOntInues

The central bank said in a press release that the incident has revealed “weaknesses in DBS’ technology and operational risk management controls”.

MAS said DBS was partly at fault because of inadequate oversight of how its systems, which were outsourced to IBM, were maintained.

Besides the censure, MAS set out eight measures for the bank to adopt.

Among these, DBS has to diversify and reduce outsourcing risks “so that it does not overly rely on a single service provider”.

DBS must also review its outsourcing vendors’ maintenance processes to ensure their technicians have the requisite level of skill, capability and experience. MAS deputy managing director (financial supervision) Teo Swee Lian said: “We expect all financial institutions to put in place a robust technology risk management framework that will ensure the reliability, resiliency and speedy recoverability of the institution’s systems and infrastructure, whether outsourced or in-house.”

Mr Andrew Sotiropoulos, who is IBM’s Asia Pacific general manager for global technology services, blames the outage squarely on “human error”.

One of IBM’s field engineers and a support centre worker had repeatedly failed to follow the correct procedures during the routine repair job, he said at a joint press conference with DBS.

The pair have been disciplined and removed from direct customer support activity.

As to whether IBM’s existing contracts with DBS would be affected or if compensation was being sought, Mr Gupta said the focus is on “remedial action”.

Since last year, DBS had begun enhancing its system reliability and resilience. That process will now be accelerated, Mr Gupta assured.

Mr David Gledhill, managing director and head of DBS technology and operations, said the bank would “refresh” its existing systems to minimise glitches. Staff will go for weekly technology forums to stay abreast of proper processes.

MAS also directed DBS to “improve its customer communication process and ensure timely communication with stakeholders with immediate effect”.

To that end, DBS said it will also improve its monitoring tools so there can be earlier alerts about possible failures.

Mixed reactions to CENSURE

A ‘proportionate’ penalty for DBS

MAS opts not to impose financial penalties

Teo Xuanwei

xuanwei@mediacorp.com.sg

SINGAPORE

Yesterday, the Monetary Authority of Singapore (MAS) opted for a third — and what the regulator described as “proportionate” — tool at its disposal when it asked DBS to set aside an additional $230 million to cover operational risks, following the system outage that crippled the bank’s teller machines, credit card and online banking services for seven hours on July 5.

In reply to MediaCorp’s queries, including why it decided against fining the bank, MAS said: “Banks are subject to financial penalties, regulatory sanctions, supervisory actions or reprimands if they fail to meet MAS regulatory or supervisory requirements. MAS believes the regulatory actions taken against DBS are proportionate to the nature, severity and impact of the incident.”

MAS’ “supervisory action” came with a censure, which DBS chief executive officer Piyush Gupta accepted. He also assured customers that even with the additional provision, DBS has enough capital to set aside — “comfortably above the required levels”.

Following the requirement, DBS’ total capital adequacy ratio will fall by 0.2 percentage points to 16.3 per cent. In Singapore, MAS sets a minimum adequacy ratio of 10 per cent.— It could have imposed financial penalties or enforced sanctions against DBS Bank to deal with the first case here of a bank failing to observe the Internet banking and technology risk management guidelines.

Actually, DBS is making profit.

The loss is caused by a Goodwill charge resulted from a projected higher competition in Hong Kong for the next 5 years.

Good, they are getting ready for a tough fight in Hong Kong.

Bad, we don't know how they going to fair in the next few years.

Now, depends whether enough people have faith in DBS or not.

This is just my personal view, don't take it too seriously.

Currently, DBS has no direction.

Price going to move between $14.30 and $14.80.

Hold First.

If price falls below $14.30, you better sell.

This is just my personal opinion, you invest at your own risk.

I calculate the value based on their 2009 full year financial data.

The right issue in 2008 had already factor into the share price in early 2009, you shouldn't consider them again.

Fundamentally, DBS fair value is around $18.00.

But Technically, the market condition does not allow that value, at least not in the short-term.

Whether you are use FA or TA, Long-Term Investor or Short-Term Trader, currently is not a good time to Buy DBS.

Good luck with your investing.