This article first appeared in The Edge Financial Daily on August 28, 2017
KUALA LUMPUR: Bank Negara Malaysia (BNM) reiterates that it does not interfere in merger and acquisition (M&A) activities of the domestic banking industry.
The regulator issued a statement yesterday in which it highlighted its role as an enabler in facilitating the merger process. “The central bank does not and will not interfere with negotiations between any of the parties involved,” BNM said in the statement.
M&A activities are driven by the market which is based “largely on commercial and business considerations”, it added.
The central bank’s statement came a few days after RHB Bank Bhd and AMMB Holdings Bhd announced their decision to call off the proposed merger plan last Tuesday, citing the failure of the two banking groups to reach agreement as the reason.
The statement was a response to a news article in a local English daily reporting that BNM was the only driver pushing the RHB-AMMB merger to go through.
“The central bank gives the approval for the parties concerned to discuss and negotiate within a stipulated time frame. During this period, the parties will conduct a comprehensive assessment of the merger after weighing in various considerations.
“These include assessment of potential synergies as well as risks arising from their respective business models, operations and systems and after taking into account extensive analysis of both financial and non-financial information.
“It is also the fiduciary duty of the board of directors of the respective entities to ensure that the merger would ultimately take into account the best interest of stakeholders, in particular that of the depositors and shareholders,” said BNM.
Speculation was rife that one of the factors that had caused the failure of the RHB-AMMB merger talks was that AmBank Bhd was said to have large contingent liabilities that were linked to the controversial state-owned strategic investment fund — 1Malaysia Development Bhd (1MDB).
In an exclusive interview with The Edge Malaysia weekly last Friday, AMMB group chief executive officer (CEO) Datuk Sulaiman Mohd Tahir insisted that there was no truth to it. He was asked as to whether AMMB had contingent liability exposure relating to 1MDB.
He replied that AmBank’s contingent liability comprises three things — bank guarantees, performance bonds and bids, plus letters of credit.
“In my books, actually, in most commercial banks’ books, like us, they would have a contingent. And that contingent is solely on the behalf of customers,” Sulaiman told the weekly.
To recap, there were changes in the top management of AmBank Group in the last two years, including the departure of former managing director Ashok Ramamurthy and the retirement of the long-serving CEO of AmInvestment Bank, Kok Tuck Cheong. The banking group had also denied that the change of guard was because of its involvement in certain transactions that were linked to 1MDB.
In 2015, in what is believed to be an unprecedented move in Malaysian banking history, BNM slapped a RM53.7 million penalty on AMMB for what the banking group said was “non-compliance with certain regulations”. The Edge previously reported that the breaches had to do with transactions linked to 1MDB.
Furthermore, the Ministry of Finance (MoF) told Parliament in November last year that “actions” were taken against AmBank group banker Joanne Yu and its former managing director, Cheah Tek Kuang, by BNM over transactions relating to 1MDB.
The MoF then said BNM had undertaken investigations into financial institutions relating to 1MDB under the Financial Services Act 2013, Islamic Financial Services Act 2013, and Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.