Business Times – 24 Apr 2008
Both offer high rates on Children Devt Accounts to cement ties with parents
By SIOW LI SEN
(SINGAPORE) The small customer has never had it so good. Two banks, OCBC Bank and Standard Chartered, are slugging it out to woo some 100,000 baby accounts by offering deposit rates more than three times as high as what DBS has been paying.
In addition, OCBC is offering a princely rate of 1.5 per cent on a minimum fixed deposit of $6,000 – something that is not available even to private banking customers. It is also guaranteeing the savings rates for the new baby bonus accounts until the year-end in spite of the universal belief that interest rates will slide further.
Both banks yesterday announced these lucrative offers whose cost they are willing to bear – because at stake is the six-year window of opportunity to sell other products such as home loans and credit cards to the parents.
Said OCBC’s head of group wealth management Nicholas Tan: ‘We view this as a long-term and strategic investment to offer relevant products and services to the community. We aim to deepen and expand our relationship with parents and children in the long term.’
Last month, the government announced that OCBC and Stanchart had emerged successful bidders to manage the baby bonus scheme, estimated to be worth some $400 million, with effect from Aug 1.
They take over from DBS Bank, which offers a rate of 0.25 per cent on the Children Development Account (CDA).
Started by the government in 2001 to encourage couples to have children, the baby bonus scheme has two components: an outright cash gift, and matching contributions to the CDA. For the third and fourth child, the total bonus from the government can go up to a maximum of $18,000.
In July 2007, there were 107,000 CDAs with $375 million in them, the government disclosed. On average, 35,000 to 45,000 babies are born each year.
Co-funding from the government into the CDA – which can only be used to pay for medical expenses, childcare and school fees – stops after six years.
OCBC is offering to pay a 0.8 per cent interest rate for a new CDA or one per cent if parents opt to save at least $50 a month.
Mr Tan told BT that the rates are guaranteed until the end of the year.
‘From now till Dec 31, the minimum rates for OCBC CDA and CDA Extra is 0.8 per cent per annum and one per cent per annum respectively,’ he said.
‘I’d also like to take this opportunity to reiterate that parents who choose to appoint OCBC to manage their CDAs will enjoy better-than-market interest rates, a comprehensive suite of product offerings and the convenience that only a Singapore bank can offer,’ said Mr Tan.
In addition, OCBC is offering a fixed deposit CDA even higher interest rates of 1.5 to 1.6 per cent for a 12-month tenure. The minimum amount is $6,000.
Mr Tan said there will be a cap on the amount which can be placed in a fixed deposit CDA, which the bank will announce in August.
Regardless of the amount, no bank in Singapore currently offers 1.5 per cent for a 12-month fixed deposit.
Not to be outdone, Stanchart also gave details of its CDA yesterday. The UK- based bank had brought forward its CDA media launch from Friday after it found out about OCBC’s plans on Tuesday.
Stanchart said it is offering 0.78 per cent for a CDA.
It also offers some extra flexibility where parents can earn a higher interest rate if they ‘pool’ the family savings together for a combined $50,000 and above.
But the bank said it could not guarantee the interest rates although it will do its utmost to hold them.
Stanchart head of consumer banking Ajay Kanwal said unless there is a material shift in movements of interest rates, the bank will not change them.
As for the higher interest rates Stanchart is offering in pooling accounts, he said it was so that parents don’t lose out. ‘We want to have as much money as possible for the child. As a parent, though, I don’t want to lose any advantage if I put money into my child’s account,’ said Mr Kanwal.
Asked if the bank can make money on its CDA product, he said: ‘We intend to do more business than just the CDA. This is a good way to enter into a long-term relationship with the customer.’
