KUALA LUMPUR (Jan 29): Besides three Malaysian banks, several foreign banks too had provided unsecured loans to embattled cruise ship operator Genting Hong Kong, said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz.
“All these banks too had to adhere to internal guidelines as well as the guidelines of their respective central banks before providing the loans.
“Is Datuk Seri (Anwar Ibrahim) insinuating that all these foreign banks have also been negligent in lending to Genting Hong Kong?” the minister asked in a post on his Facebook page on Saturday (Jan 29), in response to the opposition leader’s call to the minister to explain how the company was able to get unsecured loans from the local banks.
Singapore's The Straits Times has reported that Maybank, CIMB Bank Bhd and RHB Bank Bhd were among the chief unsecured creditors of Genting Hong Kong.
According to the report, the banks have a combined exposure of US$600 million (RM2.5 billion), and huge provisions caused by the beleaguered cruise operator would have a huge impact on their profits and share prices.
Anwar had on Thursday demanded Tengku Zafrul’s explanation on how Genting Hong Kong was able to get unsecured loans from the three Malaysian banks so easily.
Tengku Zafrul, in his response, said it is up to the banks to give collateral-free loans to whomever they want to as long as they follow the guidelines stipulated by Bank Negara Malaysia.
“Decisions to give loans are not determined by the finance minister, the Ministry of Finance, or [the banks’] shareholders but by the banks themselves,” he said.
“Every bank has its own due diligence process and credit assessment by their respective credit committees, to assess the borrowers’ ability to repay the loans,” he added.
‘Shareholders not involved in day-to-day ops’
On Anwar’s observation that the government, through Permodalan Nasional Bhd, Khazanah Nasional Bhd and the Employees Provident Fund, is the main shareholder of the three banks, Tengku Zafrul said these entities are not involved in the day-to-day running of the banks.
“The operations of a bank are left to the management of the bank. If the ministry or the shareholders interfere in the day-to-day operations, this is not right from a governance standpoint.
“I am confident that as a former finance minister himself, Datuk Seri Anwar is aware of the differences between the roles of board members and the company’s management,” Tengku Zafrul said.
The minister also said the unsecured loans obtained by Genting Hong Kong is not something that is unusual in the banking sector.
He said banks could approve unsecured loans based on their willingness to take risks at the internal level, credit assessment that meets the criteria, and approval based on the internal governance process.
“When Covid-19 hit, many companies that depend on tourism were affected, and this is, of course, something that cannot be expected when the loan was approved,” said Tengku Zafrul.
Genting Hong Kong filed to wind up the company last week, after the company warned of a potential cross-default amounting to US$2.78 billion (RM11.66 billion) due to the insolvency of its indirect wholly-owned German-based subsidiary MV Werften Holdings Ltd as negotiations with the German government to rescue the unit had failed.
Tengku Zafrul said that while Genting Hong Kong’s move is regrettable, the affected lenders, and the Malaysian banking sector as a whole, are resilient in facing these operational challenges.
“Furthermore, in the case of Genting Hong Kong — a company involved in the tourism and leisure sector — the loan was approved before the Covid-19 pandemic hit,” he said.
‘Banking sector has improved’
He added that the banking sector had actually improved compared to during the Asian Financial Crisis where the non-performing loan ratio in December 1998 jumped to 18.6% and the loan loss coverage (LLC) ratio was only at 55.9%.
“That means for every RM1 borrowed, only almost 60 sen was allocated to address the possibility of non-payment of loans,” he said.
Tengku Zafrul said that since then, the Malaysian banking system has been strengthened and is now more resilient.
“Today, the non-performing loan ratio is only 1.4%, including the provision for a partial non-performing loan ratio for loans by Genting Hong Kong.
“LLCs remained strong at 131.5% compared with 55.9% in 1998. So, the Malaysian financial system remained strong and there are no liquidity problems in the market,” he added.
Genting Hong Kong is controlled by Tan Sri Lim Kok Thay, who owns 75.5% of the company. Lim holds 44.8% in flagship Genting Bhd, which in turn controls 49.5% of Genting Malaysia Bhd (GENM), 52.7% of Genting Singapore Ltd (GENS) and 55.4% of Genting Plantations Bhd, according to Genting's 2020 annual report.
He is chairman and chief executive officer of both Genting and Genting Hong Kong, deputy chairman and CEO of GENM, and executive chairman of GENS.