KUALA LUMPUR: Finance Minister Datuk Seri Najib Razak cited banking secrecy when asked for the list of local banks that have issued loans to the debt-ridden 1Malaysia Development Bhd (1MDB).

Najib, who is also the prime minister, remained tight-lipped on whether these local banks would be affected if 1MDB’s debt was classified as non-performing loans (NPLs).

Under Bank Negara Malaysia’s ruling, commercial banks have to start making provisions for NPLs once the borrowers fail to service their debts for three months. 

“All information pertaining to financing of the banking institutions are governed by the preservation of secrecy under the Central Bank of Malaysia Act 2009.

“As such, the government cannot explain in detail and give specifics involving financing or financial institutions that are under the supervision of Bank Negara,” said Najib in his written parliamentary reply to Gombak Member of Parliament Mohamed Azmin Ali.

Mohamed Azmin had demanded that Najib give the list of local banks which have lent to 1MDB and the impact on the capital adequacy ratio of each bank if 1MDB debt is classified as NPLs.

In February, it was reported that local bankers would trigger an event of default if 1MDB failed to repay a RM2 billion loan that its subsidiary Powertek Investment Holdings Sdn Bhd took in May 2014. 

It was reported then that Malayan Banking Bhd gave 58.99% of the RM2 billion loan, while RHB Capital Bhd gave 32.41% of it.

The other lenders are Alliance Investment Bank Bhd (4.06%), Malaysia Building Society Bhd (3.24%) and Hwang DBS Investment Bhd (1.29%).

This article first appeared in The Edge Financial Daily, on June 19, 2015.