DBS BANK has further clarified the standards that it is using to determine if its High Notes were mis-sold to customers.

The bank will consider a product mis-sold if it does not match a customer's risk tolerance and if it is not suitable for an investor, based on a careful analysis of his profile.

In a statement last night, DBS said that it has found a number of cases that did not meet the standards that it upholds, as the product was 'inconsistent with a customer's risk tolerance as captured by the Financial Needs Analysis'.

This analysis is routinely done by banks to ensure that consumers have sufficient funds as well as a genuine need for that particular financial product.

DBS said it will also consider a product to be mis-sold to a customer if it is not suitable for him after 'taking into account his investment experience, income level, literacy and age'.

In addition to these factors, DBS will also examine whether the customer had sufficient liquid assets such as cash, and figure out whether he may have too high a concentration risk in a single asset class or product.

DBS 'will not hesitate to take responsibility and make cash compensation, which could be partial or in full', in cases where the product was clearly mis-sold to the customers based on the standards it had outlined.

A DBS spokesman said that the standards were also in line with Section 27 of the Financial Advisers Act (FAA), which states that the seller should have a 'reasonable basis' for making the recommendation to the customer.

This means the recommendation is only considered as appropriate after analysing a customer's investment objectives, financial situation and particular needs.

Relationship managers in banks and financial advisors in Singapore that sell financial products to retail investors all have to adhere to the FAA.

DBS added that while the bank is 'looking at all cases', it is fast-tracking 'vulnerable cases as well as customers in difficult circumstances'.

This article was first published in The Straits Times on October 24, 2008.