Dear Mr. Tan,
I am a customer of a bank and responded to their RMB timed deposit promotion, which pays an interest slightly above norm. The bank converted my existing savings in SGD into RMB at their "internal exchange rate" at 36 pips above market rate and did not get my prior approval to the conversion or provided any documentation of the transaction. Is this transaction fair to the consumer and is this valid?
REPLY
It is not fair for the bank to convert your money at their exchange rate without getting your agreement to the rate. Here are the steps that you can take:
1. You can write a letter of complaint to the CEO of the bank giving your account of what has happened and why you felt that you were not fairly treated, i.e. if you were told about the conversion rate, you would not have placed the deposit. You can ask them to reduce the spread from 36 pips to say 10 pips or whatever you consider to be a fair rate.
2. If you do not get a satisfactory reply, you can lodge a complaint with FIDREC. See www.fidrec.com.sg for the process. You can also pay $50 to FISCA (www.fisca.sg) for someone to help you to write the complaint.
3. You can also consider writing a letter to the newspaper.
The same advertisement piqued my interest as well. You get a headline interest rate of 1.78%. I thought this was pretty good as the CNY is expected to appreciate against the dollar so you could have your cake and eat it. However, on reading the fine print, I realised that the headline rate applied only if a deposit in excess of CNY 1mil was made and there was a min of CNY250,000 to join the scheme (at about 1%?). Further, I was suspicious of the forex loss (2 times) when you converted SGD to CNY and then back again. You are almost always at the mercy of the financial institutions (banks, credit card companies and the like). The slightly higher interest rate could be wiped out by the large buy/sell spread quoted by the banks. The other big giveaway is the number of full page advertisements that have been taken out. As Mr Tan says, someone has to pay for the cost of distribution! This might work only if you already have CNY sitting in some other bank account, but you are probably getting a decent return on that forex account.
ReplyDeleteThere are better savings rate alternatives out there. I found one and its a bank from our friendly neighbour.
Ben
I just attended a forex seminar organised by my company's corporate bank. There is an onshore and an offshore rate for RMB.
ReplyDeleteAll RMB bought outside China has to be at offshore rate. That's why there is a difference. The RMB is still a controlled currency.