As the exposure of Singapore banks to the US sub-prime mortgage market came under the spotlight in Parliament on Monday, Second Minister for Finance Tharman Shanmugaratnam assured lawmakers that the local banks' exposure is small, relative to their capital base. He said: "One of the local banks, DBS Bank, has also stated that it has a contingent line of liquidity support to a legal vehicle holding CDOs and that this facility has since been drawn upon. It has also stated that this vehicle does not have underlying assets comprising US sub-prime mortgages.
"While the CDO portfolios of our local asset management companies contain some US sub-prime mortgages, these are managed on behalf of their clients, who are mainly institutional investors. The investment risks are borne solely by the latter, with no legal recourse to the companies."
CDOs are collateralised debt obligations – a type of asset-backed security that uses a pool of bonds or loans as collateral.
Singapore banks have exposure to CDOs, but their amount would be about 1 percent of their capital base. - CNA/so
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