Bank customer is unhappy with a structured deposit

FROM A BANK CUSTOMER

Dear Mr Tan

I would like to share with you my agony and appreciate your advice.

In May 2004, I was persuaded to purchase a product named interest rate-linked structured deposit (5 years) by a local bank.

Barrier range of interest using 6 mth-SGD-SOR rated compiled by the Assn of Banks in Singapore.

Around Mar 2005, I was told the bank wanted to terminate the fund. It will start a new fund, adjusting the Barrier interest rate to 3.25 reason. The bank expected interest to go up.

The other terms and condition remain the same as the earlier deposit. I was also assured that it is unlikely to have zero payment and is a very safe product.

This year, my second quarter payment indicate that the interest is zero. I queried the officer and was told because the interest rate has shoot above the 3.25 barrier.

When I asked to withdraw the product, I was shocked that I had to pay a penalty of 10% to the bank.

The officer assured me the bank will try to close the fund when the interest rate comes down as it is too expensive for them to replace the fund now.

I felt so confused as in the cover letter the Pre-matured withdrawal Fee states:

"If a depositor wants to pre-maturely withdraw the deposit, it can only be done on a monthly basis and customer must pay a pre-mature withdrawal Fee, derived as the cost of replacing the above deposit at market rates for such tenor. A minimum of 1% will be imposed if such pre-matured withdrawal is made within the first 6 months. "

At that time, the officer told me that the pre-mature withdrawal fee is 1%. Now I was told is 10% (ie $7,000 plus penalty for my $50,000 structured deposit.)

The bank can terminate the fund early without penalty. When customer wants to terminated, the cusotmer has to pay l0% penalty, and not l% as mentioned early withdrawal fee and informed by the officer.

I bought this product earlier because I was told that it is like a fixed deposit, is very safe, and is not linked to any equities or currency. I would appreciate if you can enlighten me on this matter.

REPLY

I suggest that you write to the CEO of the bank and raise the facts as you have presented. Ask the CEO to explain why the penalty is 10% and why there is no interest payment. It is the bank's duty to explain the product to the customer.