DBS and computer glitch

Mr Tan,
I hope to solicit your comment on the forum titled “why not fines?” (ST forum 6 August 2010) for DBS service breakdown. I read with curiosity and I have some questions:


(a) Why there is no fine? Does it mean that the terms and conditions already provide covering for DBS for such service down time event? Maybe, as a result, MAS can only issue warning? Why there is a discrepancy in the treatment of structured notes where there is specific provision in the statute for mis-selling and MAS did not conduct independent investigation to individual cases? Is this a double standard in the handling of structured notes and this computer glitch? Have we over-blown the engineers error, while keeping silent when immoral act could have occurred in a large scale?


(b) MAS punished DBS by requiring to “set aside additional $230m against operational risks” (ST 5 August 2010). What is the meaning of this punishment? Who is entrusted to have oversight how this $230m is to be disbursed and accounted for? Who will ensure that DBS will not buy computers and charge the disbursement to this fund, hypothetically speaking? Who will have oversight that the fund spent benefit consumers specifically?


(c) What is the real accounting entry for setting up such a fund in response to the “punishment”? I guess it would be debit “fund for operational risk” and credit “retained earnings”. If there were the case, there will be no effect to the income statement of DBS and will have minimum impact to DBS. As such, this “punishment” may look more like an exercise of “journal entry”. I think MAS may have unintentionally sent a wrong impression on its resolve in dispensing this punishment.


From Cashew Nut
http://www.straitstimes.com/STForum/Story/STIStory_562625.html

My view
I am not clear about the purpose of the "punishment" meted to DBS. By asking DBS to increase its capital, it does not really affect the bottom line. Anyway, it is likely that DBS already had more than sufficient capital to meet the "punishment".

Anyway, I do not think that DBS merits any punishment. They might have slackened and caused some inconvenience to its customers, but it was not deliberate. They have probably suffered a bad reputation already.