BANKING SECTOR (Due diligence process)

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BANKING SECTOR:

(Due diligence process): 6.

Mdm Ho Geok Choo asked the Senior Minister arising from the recent incident of safe deposit boxes being destroyed at the DBS Bank branch in Hong Kong, what valuable lessons can be drawn to ensure that there is a due diligence process in place for our banking sector.

Mr Tharman Shanmugaratnam (for the Senior Minister): Mr Speaker, the Monetary Authority of Singapore places importance on our banks exercising comprehensive and effective risk management in Singapore and in their overseas operations. This includes being risk conscious and putting in place a robust risk management framework and control processes to manage the risks.

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The recent incident in DBS' Hong Kong operations is unfortunate. The bank's investigations into the incident have concluded that it was the result of a combination of factors, namely, human error, inadequate oversight of the project by the bank and its external service providers, and gaps in internal procedures. While it is an isolated incident, it has certainly heightened the risk consciousness of the banking industry, and reinforced the importance of banks being vigilant in operational controls.

DBS is tightening its procedures to ensure that incidents of this nature will not happen again.

Mdm Ho Geok Choo: I would like to ask the Minister, in view of the heightened security in Singapore, what plan or measure is there to ensure that safe deposit items are scanned for dangerous items?

Mr Tharman Shanmugaratnam: Despite the apparent similarity of the issue, ie, safe deposit items, this is a completely different question. Heightened risk management, of course, applies across the bank's operations. This was an isolated incident specific to safe deposit boxes, but it illustrates a more general principle that we need to be more alert to a range of operational risks, be it physicalor security risks or traditional risk management issues like market risk,and so on. We do not have a specific policy to do with safe deposit boxes, but we expect banks to take sensible actions, to beon the alert and to think hard about their own reputation.