Opening Remarks by Mr Heng Swee Keat, Managing Director MAS, at the Launch of the Financial Industry Disputes Resolution Centre (FIDReC), 31 August 2005
Good morning, ladies and gentlemen. I am very pleased to be here today for the launch of the Financial Industry Disputes Resolution Centre, or FIDReC.
2 Fair and transparent dealing by financial institutions, and informed decision making by empowered consumers are two key objectives of MAS in the supervision of the financial sector.
3 When financial institutions deal fairly with consumers and investors, and disclose relevant information, they enhance the confidence of consumers and enable them to make informed choices. This generates greater trust and loyalty among consumers in the specific financial institution itself. Just as important, the confidence in each institution generates confidence in the financial system as a whole, and this positive externality accrues to all players.
4 Similarly, when consumers understand the characteristics of the financial products and transactions they enter into, they are more likely to choose products that best meet their needs. Empowered and well-informed consumers not only enhance their own interest, but can also serve as a source of innovation.
5 For these reasons, MAS works closely with the industry and with consumer bodies, to promote investor education and to enhance fair practices in the marketing and distribution of products.
6 However, despite the best intentions, there will be occasions where consumers and financial institutions disagree on the nature of the representations or of the commitment that they have entered into. In the event of such disputes, we must have an efficient, convenient and affordable dispute resolution mechanism.
7 Hitherto, disputes relating to banking matters have been dealt with by the Consumer Mediation Unit (CMU) while those relating to insurance are handled by the Insurance Dispute Resolution Organisation (IDRO). These schemes have worked well.
8 However, we are now witnessing the launch of more new financial products that cut across traditional boundaries of banking, insurance and capital markets. In addition, as we step up our efforts to encourage greater participation in financial market, more retail investors will enter the market. To keep up the confidence of investors, apart from a greater focus on investors' education, we need to provide a simple and cost-efficient way to handle disputes.
9 I am therefore pleased that the industry has come together to create FIDReC, by merging the Consumer Mediation Unit (CMU) and the Insurance Dispute Resolution Organisation (IDRO). Capital markets disputes will also, for the first time, be brought under a dispute resolution scheme.
10 MAS fully supports this initiative, and has provided funding for the set-up cost from the Financial Sector Development Fund. The recurrent cost will be borne by the industry, in proportion to the usage of the resources of the scheme. FIDReC's governance structure, membership and terms of reference were finalized after public consultation. FIDReC will be governed by a Board of 7 Directors, of whom one each will be from the banking, insurance and capital market sectors. FIDReC will be chaired by a very eminent and public-spirited individual, Mr Goh Joon Seng, former Chairman of CMU and IDRO, and a former Supreme Court Judge.
11 FIDReC will use mediation as the main way of resolving disputes. Mediation involves having an impartial third party to resolve the disputes in an amicable, consultative way. Statistics from CMU and IDRO show that about 95% of disputes are resolved through mediation. If mediation fails, the dispute then enters into adjudication.
12 FIDReC has 3 important features to enable it to serve as an effective dispute resolution body.
13 First, by handling all disputes that relate to forms of financial transactions, it provides consumers the convenience of a one-stop centre. Second, FIDReC is staffed with independent professionals including former judges, lawyers and industry professionals who understand the business practices and nature of products in the financial industry.
14 Third, FIDReC is affordable. To ensure easy access, mediation services will be free. If current trend continues, it means that 95% of all cases handled by FIDReC will be free. Should adjudication be needed, consumers will pay just $50.
15 The setting up of FIDReC is a strong signal of the industry's commitment to enhance fair dealing with its customers and raise the standard of professionalism. As of today, more than 380 financial institutions have subscribed to FIDReC.
16 I congratulate the industry, the various consumer bodies, the staff and boards of the current Consumer Mediation Unit (CMU) and Insurance Dispute Resolution Organisation (IDRO), as well as FIDReC's new Board under Judge Goh Joon Seng for their hard work and efforts in making FIDReC a reality.
17 The success of FIDReC is a collective effort which requires the continuing commitment of all stakeholders. I look forward to many more collaborative efforts by MAS, the financial industry and consumer groups.
18 I am pleased to formally launch FIDReC this morning, and I wish FIDReC every success.
19 Thank you.