Sunday, 17 August 2008

WPQ 21 July 2008: GIC Investment in UBS

There has been a barrage of very bad press around UBS in recent months. Quite apart from the mounting write-offs (I've lost track of how many billions to date) and plummeting share price, there have also been stories about how it is being probed and sued in the US for helping rich clients evade US income tax and fraudulent dealings in selling a type of investment called auction-rate securities. To its credit, the local MSM has done a pretty good job of covering these developments, tellingly by way of syndicated articles from newswires and foreign press.

Given the very significant presence of UBS in Singapore, in particular the size of its private bank her, and how GIC's investment in UBS was expected to embed UBS even more deeply into Singapore, I thought it relevant to ask this question. After all, we should ensure that any fraudulent and criminal practices in UBS' US operations do not exist here.

I asked the question even though I had already anticipated the answer. I was not disappointed in that the answer was exactly what I had expected -- this is, after all, not the first time such questions have been asked of our investments -- but I certainly do not think the answer is adequate. At the very minimum, as the owner of the funds being managed by GIC, I would expect the Government to have a view on how its investments are doing, even if it does not interfere in the actual investment decisions.

(Implications from Ongoing Investigations)

Mr Siew Kum Hong: To ask the Senior Minister whether the ongoing investigations in the US into allegations that UBS’ private bank helped clients evade taxes and that UBS had defrauded its clients who had purchased auction rate securities have any implications for the investment by the Government of Singapore Investment Corporation in UBS and for Singapore’s aspiration to be a global financial centre and a private banking hub.

Mr Goh Chok Tong: Singapore's success as an international financial centre is built on a track record and reputation for integrity, high standards of financial regulation and rigorous supervision and strict enforcement. MAS requires all financial institutions operating in Singapore to abide by the relevant laws and regulations in Singapore and their home jurisdiction.

The investment in UBS has nothing to do with our effort in building Singapore as an international financial centre. This investment is made by GIC and Government does not influence or intervene in GIC’s specific investment decisions. GIC makes these decisions on its own, and has explained the reasons for its investments in UBS.

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