Heng Swee Keat: The sale of structured products to retail investors Opening remarks by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, at the Monetary Authority of Singapore’s Press Conference on the Sale of Structured Products to Retail Investors, Singapore, 17 October 2008. *  *  *  Many individuals who purchased structured products linked to Lehman Brothers are worried about their investments. MAS has been actively working to ensure a fair resolution for these investors. We have also been communicating our actions to the public since the issue first came to light in the middle of September. Our first priority has always been to help affected investors. Let me touch on what we have done and how we have put in place a serious and impartial resolution process to deal with investors’ legitimate concerns. First, we are making sure that HSBC Institutional Trust Services (Singapore) Ltd, the trustee for the Lehman Minibond Programme, carefully considers all options and acts in the interests of investors. If a new swap counterparty is available, investors would have the opportunity to vote on this option. In order to assist investors make an informed decision, MAS will appoint an independent financial adviser. We expect the trustee to know whether options will be available to noteholders by the end of next week.
8  BIS Review 95/2010  To some extent, these strategies and their implications were captured to a degree in performance measures. For example, the rise in reported average ROEs of banks over the past few decades occurred alongside a rise in its variability. At the same time as average ROEs in banking were trebling, so too was their standard deviation (Chart 17). In that sense, the banking “productivity miracle” may have been, at least in part, a mirage – a simple, if dramatic, case of risk illusion by banks, investors and regulators. (a)  Increased leverage  Banks’ balance sheets have grown dramatically in relation to underlying economic activity over the past century. Charts 19 and 20 plot this ratio for the UK and the US over the past 130 years. For the US, there has been a secular rise in banks’ assets from around 20% to over 100% of GDP. For the UK, a century of flat-lining at around 50% of GDP was broken in the early 1970s, since when banks’ assets in relation to national income have risen tenfold to over 500% of GDP. This century has seen an intensification of this growth. According to data compiled by the Banker, the balance sheets of the world’s largest 1000 banks increased by around 150% between 2001 and 2009 (Chart 21). In cross-section terms, the scale of assets in the banking system now dwarfs that in other sectors.