Rejected by BT Forum
Agent Bank' Fees Under CPFIS
Dear Sir
Mr Peter Heng, First Vice President, Corporate Affairs Division of UOB made great virtue of it being the first CPF agent bank to "proactively" reduce CPF transaction fee "in response to the need to lower the cost of using CPF Funds to invest", (BT Mailbag, Jun 29). He has also, on behalf of the other Agent Banks defended the then charges made under the CPFIS as reasonable, (BT Mailbag. Mar 11).
I think Mr Peter Heng, writing for his own bank, and on behalf of the other Agent Banks has been less than honest, because he has studiously avoided telling CPF members under the CPFIS, why is it that the Agent Banks deem it fit to charge $30 (and now $25 for UOB) for share transactions involving 10 lots of 10000 shares when the cost is the same as that involving a transaction involving only 1 market lot of 1000 shares where the bank fee is $3 (now $2.50 for UOB). I first brought this out in my letter in Mailbag on Nov 4, 1999.
The moral high ground tone in Mr Heng?s letters and his use of the term "proactively" are not supported by the agent banks and his bank's conduct. Let me explain why by recounting the process involved for share trasaction under the CPFIS.
The Singapore Stock Exchange , now known as SGX, began conversion into scripless trading in 1992 and completed the process in June 1994. In the scrip form, each share certificate was for 1000 shares. When a member bought, say 5000 shares of a company listed on the SGX, the agent bank would receive 5 share certificates plus the accompanying transfer deeds and contract note. The bank would then have to manually check the quantity received, ensure that the particulars on the share certificates, the transfer deeds and the contract note matched before it would pay the broker. The bank would then have to separate the transfer deeds from the share certificates, fill in the required particulars, like name of the purchaser and address of its nominee account, the price paid, sign and date each transfer deed. The transfer deeds, the necessary cheque payment and a duly completed form were then sent to the Inland Revenue for stamping.
After stamping the transfer deeds, the agent bank had to match each transfer deed with the share certificate again. These, together with the required amount of registration and scrip fees, were then sent too the various companys? registrars for registration.
On receipt of the re-registered share certificates from the registrar, usually after about 6 weeks, the bank would again have to count them and keep a record of them before storing them in a safe.
Seen in this light the $4 per 1000 share charged by the agent banks with no maximum charge before July 1994, was probably fair, as the scrip process was very labour intensive and therefore, costly.
In scripless trading the whole transaction is processed by the computer, which the banks already need for its other banking operations. There is no need for the tedium of any manual checking, book-keeping and re-registering. There is certainly no case for charging more than $3 (now $2.50) for each transaction, regardless of the number of shares involved. I doubt if the agent banks can even show any justification for charging $3 (now $2.50) for each transaction considering the amount of time, labour and office space saved since trading on the SGX became completely scripless. I understand that it costs about 30 cents for a normal bank transaction if made through an ATM as compared to about $2 for the same transaction made over the bank counter.
Mr Peter Heng's Mar 11 letter should be seen in this light, although he failed to explain that the cost saved by the banks is disproportionate to the amount of reduction in the bank's charge from $4 to $3. Between January 1992, when the scripless conversion process began, and June 1994 when the scripless process was completed, the banks did not pass on any savings on those shares that were then traded in the scripless form. Furthermore, the cost of computer hardware and software and telecommunication charges have been falling continuously over the years and yet the banks have not been reducing their charges accordingly. Mr Heng is therefore less than totally honest when he said that the agent banks "will pass on any savings when they achieve any efficiency savings".
Bin Hee Heng