Are Singapore's Banks Safe

Top banks admit huge losses in Wall Street 'pyramid' fraud

LONDON (AFP) - - Top world financial groups on Monday revealed massive potential losses from an alleged scam run by Wall Street trader Bernard Madoff, admitting they were fooled by a classic pyramid investment fraud.

British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars (euros) could be wiped off their balance sheets by a scandal that is set to affect some of the richest people in the world.

For the rest of the news, please refer to
http://sg.news.yahoo.com/afp/20081215/tts-us-finance-fraud-world-972e412.html

This is the problem with an overly free market where government gives a free hand to the institutions to run the show, with minimal government policy and controls. There is insufficient checks and balances in place, even tho America produces among the world largest audit firms.

All these talk and financial bailout promised by the Bush Administration sounds like, a tall tale. I have little faith in their government's 'intervention'. I keep my fingers cross and hope this is among the final few skeletons in the closet. If a lot more skeletons have yet to be revealed, I worry the global financial powerhouse may not be able to sustain the collapse and that US Economy will really go into bankrupcy.

The US financial system is a financial Titanic that is a make believe and since disaster of this magnitute has struck, the ship is sinking fast and smaller rescue boats (money) from all over the world are trying to save as many lives (financial system) as possible... an up-mountain task

Back in Singapore, prior to the Asian Crisis back in 1998, banks are not run as tightly as it is today. Should the Asian Crisis not happened 10 years ago, our economy and banking system, including some of financial companies may be in deep trouble, to the extend, some banks may even collapse given this magnitute of global financial crisis.

The Asian Crisis taught the banks a dear lesson. Huge price was paid back then and not mentioned to the public. Banks take had to write off huge debts and many people went bankrupt (banks were unable to recover debts). New governing policy were put in place, by the institutions and MAS alike.

Here's an example. Before Asian Crisis, bank branch Managers were able to approve loans up to a certain amount (let's say, $2mil). There were no proper checks. Managers approve loans are their discretion, even if it means, the borrower actually couldn't afford to pay it.

Post Asian Crisis (not sure which year), the Credit Bureau were set up by the banks. Credit Bureau will list down any individuals who has loans, credit cards, OD, etc, with any member bank. With that, banks are able to better assess if the borrower are over exposed. Tho there is limitation to the system, it still acts as a first screen.

In conclusion, local banks are definitely safer than most other banks globally, due to the changes and checks in place. MAS also makes it mandatory for financial institutions (including banks, insurance co, etc) to have fixed assets of a certain percentage to their liability.