Media Statement on Internal Investigation into Safe Deposit Box Incident and Progress with Customers

Hong Kong, October 29, 2004 – A DBS Bank (Hong Kong)'s internal investigation into the incorrect removal and destruction of 83 customer safe deposit boxes at its Mei Foo branch found that a combination of human error, inadequate project oversight and the lack of formalised procedures for safe deposit box removal, contributed to the extremely regrettable incident.

The investigation uncovered no evidence of fraud or foul play. DBS has also settled in full claims from 51 affected customers.

An internal investigation team has submitted its findings to local regulators, along with recommendations for follow-up action.

Randolph Sullivan, Chief Executive Officer (CEO) of DBS Bank (Hong Kong), said: "The investigation showed that both our external service providers and our own staff made mistakes which let our customers down. It identified gaps in our internal policies and procedures, which will now be corrected promptly. We are determined to ensure that such an incident does not happen again.

"We want to stress again that no matter what lapses there were on the part of external parties, we at DBS hold ourselves responsible to our customers."

Key findings of the investigation

In particular, the investigation team noted that:

• Kumahira Hong Kong Ltd (Kumahira) failed to ensure clear, unambiguous instructions were given, resulting in contracted workmen incorrectly removing two blocks of in-use safe deposit boxes. This was the root cause.
  
  
• supervision by Jones Lang LaSalle (JLL), the project manager, and Kumahira of the workers removing the boxes was lacking.
  
  
• DBS Mei Foo branch staff failed to impose appropriate procedures to check that only empty safe deposit boxes were removed.
  
  
• relevant parties failed to appreciate the operational risks involved in renovation of vaults containing in-use safe deposit boxes.
  
  

Sequence of events

The events that led to the destruction of the safe deposit boxes took place on Saturday, October 2. Workmen for Kumahira arrived at the branch just after it closed at 1 pm.

Kumahira is an established manufacturer and provider of safe deposit boxes with a dominant share of the market in Hong Kong and a previous contractor of the Bank. The reappointment of the firm was recommended by JLL, the project manager for the Mei Foo branch renovation and the exclusive facilities manager for DBS in the region.

Eleven DBS Mei Foo branch staff were present when the branch opened for business in the morning of Oct 2. Throughout the removal of the safe deposit boxes, at least two branch employees were present. However, they were carrying out their normal day-end duties and assumed the external contracted parties had the staff and expertise needed to oversee the removal process. No supervisor from Kumahira or staff from JLL were present.

In the event, the workmen removed a total of ten blocks of safe deposit boxes, instead of the eight identified in an Installation Plan drawn up earlier by Kumahira. Two of the blocks removed contained the 83 safe deposit boxes with customers’ contents.

The removal works were completed at around 6.30 pm and the safe deposit boxes were immediately transported to a scrapyard.

The mistake was discovered mid-Sunday morning, October 3, when another team of workmen returned to the branch to install bigger safe deposit boxes. Upon being informed of the mistake, the Kumahira workmen, JLL and the Mei Foo branch staff went to the scrapyard where they ascertained the safe deposit boxes were already compressed.

During the remainder of Sunday and into the night, DBS personnel worked to secure the boxes, recover whatever contents were salvageable, identify customers affected and escalate the incident to senior DBS management.
The following day, Monday, October 4, various stakeholders including affected customers, DBS' regulators in Hong Kong and Singapore, most members of DBS boards in Singapore and Hong Kong, and other senior management staff were informed.

DBS Bank (Hong Kong) also held two media conferences on Tuesday, October 5, and Wednesday, October 6. Bank executives revealed what happened, accepted responsibility, and presented a compensation package for prompt settlement of customer claims. The investigation team was set up on Wednesday, October 6.

Conclusions of investigation team

The investigation team concluded that:

• Kumahira failed to provide its contracted workers with a copy of the Installation Plan and adequate written instructions. It also did not ensure that verbal instructions were clearly understood.
  
  
• JLL, as project manager, was responsible for managing and enquiring about the process by which Kumahira would ensure that the correct safe deposit boxes were removed, and to be satisfied that the procedures were robust and properly documented.
  
  
• DBS Mei Foo branch staff relaxed direct oversight, instead relying on external professionals – JLL as a specialist project management and facilities management firm, and Kumahira as a specialist safe deposit renovation firm. As a minimum, branch management and staff should have reviewed the removal works in the vault prior to leaving the branch.
  
  
• All parties failed to properly assess the renovation project as a high risk event involving customer assets. Instead, they viewed the renovation to be a straightforward, industrial works project involving heavy removal equipment and specialist external service providers.
  
  
• While DBS Bank (Hong Kong) has operational procedures for routine branch operations including the rental of safe deposit boxes, it did not have formalised procedures for removal of safe deposit boxes which was a non-routine event.
  

The investigation team also concluded that this was an incident isolated to the Mei Foo branch renovation and no other DBS Bank (Hong Kong) branches and their customers were affected by the incident.

Remedial actions

The investigation team recommended a series of remedial actions to be taken by DBS Bank (Hong Kong). These are primarily aimed at tightening policies and procedures for capital works management, establishing written guidelines for the removal/disposal of safe deposit boxes and enhancing physical security awareness.

The Bank has since formed a task force to review the guidelines, procedures and manuals related to renovation work at all its branches, particularly those with safe deposit boxes. It is also reviewing the terms and conditions for its safe deposit rental agreement.

Mr Sullivan said: "Since the incident, we have acted with professionalism, speed and compassion to contact and offer support, assistance and compensation to all affected customers. To date, 51 customers have reached a settlement over their losses, and we believe they acknowledge that they have been treated with fairness and compassion. We are working with the remaining customers to honour our obligations.

"We hope that our affected customers, our employees, and others in the community have taken note of our commitment to live up to our responsibilities."

DBS Bank (Hong Kong) assigned dedicated case handling officers to address the many issues faced by the affected customers, and to listen to their concerns. A claims support unit and a claims committee were also formed. Arrangements for viewing and return of content of recovered boxes were urgently made, starting the weekend of October 9 and October 10. An expert jewellery company and a claims assessor were appointed to help and guide customers with the claim process. An external law firm was also retained to help with free replacement of lost/damaged documents.

DBS Bank (Hong Kong) Head of Consumer Banking, Sunny Cheung, commented: “Our staff have shown dedication to our customers and have worked evenings and weekends, day after day, to do all we can to address the specific concerns of each of the affected customers.

“I have seen repeatedly how this has been a particularly difficult time for these customers, as their losses are deeply personal. Their treasured items from their youth, their families and the past and those which mark their aspirations and achievements cannot be replaced. I have been deeply moved each time I have sat with affected customers and learnt first hand, details of the very personal losses they have suffered.

"We have learned from our mistakes and we are determined to live up to the trust that our customers have placed in us as a bank."

About DBS
Headquartered in Singapore, DBS is one of the largest financial services groups in Asia. The largest bank in Singapore and the fifth largest banking group in Hong Kong as measured by assets, DBS has dominant positions in consumer banking, treasury and markets, asset management, securities brokerage, equity and debt fund raising. Beyond the anchor markets of Singapore and Hong Kong, DBS serves corporate, institutional and retail customers through its operations in Thailand, Malaysia, Indonesia, India and The Philippines. In China, the bank has branches and representative offices in Shanghai, Beijing, Guangzhou, Shenzhen, Fuzhou and Tianjin. The Bank's credit ratings are among the highest in the Asia-Pacific region. More information about DBS Group Holdings and DBS Bank can be obtained from our website www.dbs.com