This article first appeared in The Edge Financial Daily, on December 2, 2015.
KUALA LUMPUR: Bank Negara Malaysia (BNM) has yet to establish “direct communication” with former 1Malaysia Development Bhd (1MDB) senior executives Casey Tang Keng Chee, 50, and Jasmine Loo Ai Swan, 42.
“We have not had any direct communication with them yet,” the central bank’s governor Tan Sri Dr Zeti Akhtar Aziz told reporters after delivering her speech at the Iclif Leadership Energy Summit Asia 2015 here, but declined to elaborate.
On July 24, BNM issued a statement which indicated that the central bank is seeking aid from them, and urged anyone with information on them to contact it or file a report at the nearest police station.
On the progress of its probe into 1MDB, Zeti said BNM is not allowed to discuss the status before the case is concluded.
“The investigation [by BNM] has completed. Now, there is some progress in the actions that are being taken relating to some of the approvals that we have given them (1MDB), and that is in progress, so I am not at liberty to discuss the status until that is concluded,” she said.
BNM on Oct 24 issued a statement to revoke three permissions granted to 1MDB under the Exchange Control Act 1953 for investments abroad totalling US$1.83 billion (RM7.76 billion).
On top of that, BNM issued a directive under the Financial Services Act 2013 to 1MDB to repatriate the amount back to Malaysia and submit a plan to the bank for this purpose.
However, 1MDB indicated that it would not be able to make the repatriation as the funds have either been spent or earmarked for a debt transfer.
When asked to comment on the possible impact of the disposal of 1MDB’s energy assets held by its unit Edra Global Energy Bhd to China General Nuclear Power Corp, Zeti declined to comment, but noted that the local market is “huge” compared to the RM9.83 billion transaction.
“I am not going to comment on individual transactions; our system is very large and our market is huge. So far in our monitoring, [only] cumulative transactions have an impact on the market. Our foreign-exchange market is huge — that is the point that I want to make,” she said.
On the imposition of a RM53.7 million penalty on AMMB Holdings Bhd (fundamental: 1.5; valuation: 2.55) due to non-compliance, Zeti also refused to reveal the details of the wrongdoing, saying the information is market-sensitive.
“We cannot talk about individual financial institutions, especially [if] that institution is listed, and it (details of non-compliance) is market-sensitive,” she said, adding that the imposition of penalties is not rare in the industry.
“We have imposed penalties from time to time on banks for non-compliance with our rules and regulations; we are very strict about complying [with] our rules and regulations,” Zeti said.
“Of course, from time to time it could be different rules that they could not comply with, [but] they have compliance officers in their financial institutions, and this is done all over the world, so this is not unique and rare. It happens from time to time,” she explained.
Meanwhile, in response to the announcement made by the International Monetary Fund (IMF) to include the yuan as one of its special drawing rights currencies, Zeti described the news as “a welcome development”.
She said BNM’s yuan reserves were at a “comfortable” level, but the central bank would make continuous assessment to ensure that the amount held remains relevant.
“We will assess carefully; we already have renminbi at a level that we are comfortable with. But as the market grows in size, there will be opportunities for [yuan] investment,” Zeti told reporters in response to a question on whether BNM would increase its yuan reserves following the IMF’s announcement.
Zeti also dismissed concerns about Malaysian banking asset quality and reiterated that the local banking system is “sound and solid”.
“The banking system has huge capital buffers and they can absorb this (impairment loans). Furthermore, the impaired loan is very low, so this is not a concern. Our banking system is sound and solid,” she said.
At the event yesterday, Zeti mentioned that BNM is well prepared for an interest rate hike by the US Federal Reserve.
“When I am asked the question about how we are going to manage ‘the lift-off’, my response is that it is not what we will do now, but what we have done before it happens that will see us through this period,” she said.
“It is not only the buffers that have been built, but also the capability that has been developed that will better allow us to intermediate and thus absorb the shock. This will enable us to withstand the volatile financial flows that are already occurring in anticipation of this eventuality,” Zeti added.
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