GIC credit limit breaches totalled S$7m

Related: GIC incurred losses on investments

THE nine transactions by the Government of Singapore Investment Corporation (GIC) which had breached their credit limits, according to a recent Auditor-General's report, added up to about US$5 million (S$7 million), Deputy Prime Minister Lee Hsien Loong revealed yesterday. The amounts for each transaction were between US$200,000 and US$800,000, he said, in reply to a question from Mr Low Thia Khiang (Hougang).

The opposition MP had wanted to know what measures had been taken by GIC following the findings and how much the transactions totalled.

Replying, Brigadier-General (NS) Lee said that the breaches were "very small in magnitude", ranging from 0.028 per cent to 0.14 per cent of the value for each of the transactions. As the parties involved were reputable financial institutions, the risks of default were also "insignificant," he said.

Explaining that the breaches were "technical in nature", he said that the nominal value of the bonds, instead of the market value, had been used to calculate the exposure limits.

"The nominal value calculations were well within the limits but, based on the market value, the credit limits would have been exceeded," he said.

In his report in July this year, the Auditor-General had also noted that GIC was reprimanded by the Board of Commissioners of Currency, Singapore (BCCS) for nine unauthorised transactions in 1995.

In reply to Mr Low's question on this, BG Lee said that the problem arose because GIC had, on behalf of BCCS, purchased certain securities which were not guaranteed explicitly by a government, although they were regarded as guaranteed implicitly.

GIC, he added, would now comply with the Currency Act and invest only in securities with explicit government guarantees.

In a separate written answer to Mr Low on the Auditor-General's finding that senior Unicorn International employees had made false and double claims, Defence Minister Tony Tan said that the firm had conducted its own internal investigations and improved its operating controls to avoid double payments and mistakes in mileage claims.

Published in the Straits Times. Oct 2, 1996