Singapore banks and short selling

Dear Mr. Tan,
I always thought that putting my lifetime savings in a bank to earn interest is safe. The recent crisis in US and news about Lehman Bros and AIG is disturbing. I begin to wonder how safe is our Singapore banks and which of the three banks is the safest of all? Why are we protected only on $20,000 on each account?

The Straits Times article about the Minibond series 3 is enlightening. I was offered this product which was sold as a bond. I stayed clear because I had a bad experience of structured deposit sold by bank. What worries me is that the bank and financial adviser also claimed that they were also mislead.

Retail customers transact with a bank based on trust that they are reliable and expert in financial product. Can anyone enlighten me what is the role and ethic of the bank?

In US, the government has banned short selling in their stock market to salvage the crisis. The relevant authorities acknowledge the negative effect of short selling. In Singapore short selling is allowed too.

The financial adviser told me that buying equities is about investment. The unfolding of the recent event in US and our stock market make me think otherwise. Buying equities is not an investment when short selling is involved. SGX has tried to take measures by allowing short sell on borrowed shares. Short-sell will make the price go up or down. Can thus be considered as genuine market force of supply and demand?

Let me try to visualise the Lehman scenario as a layman. For example, there are 1 million genuine Lehman share, but because of short selling, 10 million Lehman share were artificially created in the stock market and sold down. I hope in the near future all forms of short selling should be banned from sensitive equities, such as financial, banking and insurance equities.

I would appreciate if you can comments how safe and resilent is our local bank to the recent unfolding crisis in US.

REPLY
I think that the Singapore banks are quite safe. Even in America, the large banks dealing with the public are quite safe. They are monitored by the Fed.

The banks that got into trouble are the investment banks, which were highly leveraged and not controlled by the Fed.