Brand Health Check: DBS Bank - Failed safety controls cause bank's shame

For DBS Bank, there clearly is such a thing as bad publicity. The low-profile bank exploded onto the front pages of Asia's newspapers after one of its Hong Kong branches mistakenly discarded 83 safety deposit boxes as scrap metal.

The boxes were later crushed by industrial compressors before the error was realised, leaving the bank with a serious crisis on its hands. Newspapers and TV stations were soon carrying images and comments of furious customers.

The boxes - believed to contain cash, bonds, certificates and jewellery - were destroyed as a result of human error, after being included among 837 empty safe deposit boxes sent to the scrap heap.

DBS Bank's PR machine sprung into action quickly enough, stating that it would honour its responsibilities. With a number of customers taking their complaints to the police, and the Hong Kong Monetary Authority (HKMA) announcing that it was "taking a serious view" of the matter, the bank appeared to be fully cognisant of the need to placate affected customers.

However, DBS has attracted some criticism for its handling of the crisis.

The error was discovered by the bank on October 3, one day after the boxes were transported to the scrap yard, but officials did not go public until two days later. Meanwhile, internet postings were already revealing that cash, property deeds and even a diamond-studded Rolex watch had been found at the scrapyard.

By October 6, DBS had offered affected customers a compensation package worth HK$12.5 million (US$1.6 million), a sum described by the HKMA as "appropriate". While some rejected the DBS offer, others accepted it.

Nine customers accepted an initial payment of $50,000, while eight accepted an extra $100,000 in exchange for waiving their right to further claims.

While a DBS official asserted that no mass withdrawal of account holders has taken place, the bank's image has taken a battering in the media.

How it rebuilds trust with customers and fulfils its 'Experience something new' slogan - for all the right reasons - is likely to prove a massive challenge.

DIAGNOSIS

DON LANCASTER, Managing director, Lowe Hong Kong

It's all about trust. Every survey about bank brand choice puts trust top of the list. Trust is 'table-stakes' if you want to do banking; I have always advised banks against claiming trust in case the claim raises more doubts than reassurance.

DBS' debacle with its customers' valuables goes almost as far as possible in undermining trust. The very nature of safety deposit boxes, the feral fear that drives their use and years of imagery make these little boxes iconic for bank trust. That is unless you scrap them. Customers' trust alongside their emotional and financial valuables has been literally crushed.

Then they read the bank's small print - much like most banks - minimising liability in case of disaster and boy, do the customers feel warm?

DBS has tried hard to overcome this enormous gaffe, first by quickly informing those hapless customers, then coming out with an apology in reasonable time. But is its compensation offer reasonable? I'd agree with HKMA's assessment of 'appropriate' only if I had lost substantially less in cash value and little of emotional value - otherwise I'd be more than a bit ticked off.

Someone recommended an insurance campaign 'to take people's minds off it'. Perhaps not. Others more in-tune suggest it will take years to overcome - more accurate.

RICHARD TSANG, Chairman and MD

Strategic Public Relations Our banking industry has been plagued by negative publicity in recent weeks, with the latest incident being DBS mistakenly destroying still-occupied safety deposit boxes.

The incident has shaken the confidence of DBS customers and probably made consumers in general more sceptical than ever of how banks manage their services and the money and property placed in their care. There are hints that pressure may be mounting on the relationship between banks and retail customers in particular, largely based on trust, to allow closer public scrutiny.

It is a pity that DBS' good reputation was tarnished by its negligence, when safety deposit boxes are provided today by banks primarily as a value-added service to reinforce customer relationship instead of generating income.

There were apparently flaws in DBS' handling of these safety deposit boxes, and the 'belated' announcement of the mistake certainly has not helped. In addressing aggrieved customers, though the bank's management deserves credit. They were forthcoming in acknowledging and apologising for their mistake, and were ready and willing to accept responsibility for it. Their prompt compensation offer is also a saving grace, though whether the amounts are adequate has become a controversy in itself.

TREATMENT

LANCASTER'S PRESCRIPTION

- DBS should invest heavily in the brand to rebuild (or generate) core values and equity. Only by projecting a clear, consistent and compelling brand image and delivering against it in all aspects of its business can DBS credibly reassure customers. Yet more credit card offers just won't cut it, nor will an investigation blaming the workmen.

- The bank must dig deep to ensure customers are fairly compensated.

Speedy verification and sensitivity seem more appropriate than a flat, rights-waiving cash offer that lets DBS off the hook.

TSANG'S REMEDY

- To salvage general customer confidence, it is essential that DBS comes up with a concrete solution to management flaws.

- How the compensation issues are finally resolved could help or further harm DBS' image, which will take focused efforts to amend.

- More immediately, to lessen media exposure, instead of having the customers come to the bank for meetings, thrusting everybody under the media limelight, it could go to them to discuss privately individual compensation arrangement.