KUALA LUMPUR — Nov. 30, 2017: The Royal Commission of Inquiry into Bank Negara Malaysia’s (BNM) foreign exchange dealings in the 1990’s believes that then prime minister Tun Dr. Mahathir Mohamad had condoned the actions of the then-finance minister which led to losses of RM31.5 billion.
The commission is also of the view that the then finance minister Datuk Seri Anwar Ibrahim had deliberately concealed facts and information and made misleading statements to the Cabinet.
“The commission is of the opinion that there were deliberate concealment as the annual reports of BNM did not state the actual losses incurred from the forex dealings from 1992-1994,” the five-man commission led by former chief secretary to the government Tan Sri Mohd. Sidek Hassan said in its 524-page report tabled in Parliament today.
The then prime minister was also informed by the finance minister, together with the Treasury’s deputy secretary-general in late 1993, that BNM suffered estimated losses on forex dealings for 1992 and 1993 of RM30 billion.
The findings of the commissioners, who included Datuk Wira Kamaludin Md. Said, Datuk Seri Tajuddin Atan, Tan Sri Saw Choo Boon and Pushpanathan S. A. Kanagarayar, were presented to the Yang di-Pertuan Agong Sultan Muhammad V.
The commission opined that there was evidence from the inquiry suggesting a possible offence of criminal breach of trust of BNM’s fund under the Penal Code by persons directly involved in the forex dealing operations, principally Tan Sri Nor Mohamed Yakcop, who appeared to have absolute control and responsibility for the dealings.
According to the report, although Nor Mohamed had dominion over BNM’s funds and seemed to have a free hand in the dealings, he could not have carried on for such a long time without the direct or tacit approval of his superiors and/or others persons in authority.
The commission said it assessed joint liability of these persons which could fall under the Penal Code and explained as having common intention or abetting.
“The persons falling under this category would be the deputy governor, the governor, the BNM board of directors, the minister of finance and prime minister,” it said.
Following an open inquiry of 25 witnesses and various documentary evidence, the commission was definitive that BNM had incurred losses of RM31,5 billion in 1992, 1993 and 1994.
“The huge losses had a significant negative impact on the country’s economy whereby it had deprived the country of development opportunities,” the report said, adding that it had also impaired BNM’s ability to fulfil its mandated role as the country’s central bank.
The report noted that the losses were hidden by use of unconventional accounting treatments such as booking losses to reserves in the balance sheet.
Another mechanism was the absorption of the remaining losses by transfer of shares from the government to BNM to bolster the balance sheet and the creation of a deferred expenditure item in the balance sheet to be amortised over 10 years.
“No further action was taken by the minister of finance and the Treasury secretary-general (as a board member) despite they being informed by the auditor-general on the losses and the unusual accounting treatment,” said the report.
The commission reported that from the extract of the minutes of three Cabinet meetings in 1994, the then finance minister who chaired the meeting on March 30, 1994, as deputy prime minister, made no mention of the actual losses of RM12.3 billion for 1992 and RM15.3 billion for 1993. The losses for 1993 were reported as RM5.7 billion.
The then-prime minister who chaired the meeting on April 6, 1994, did not correct or offer more information when the forex losses for 1993 were recorded as only RM5.7 billion.
“It could be proven that several persons from BNM, Finance Ministry, Auditor-General’s Department, BNM board of directors and minister of finance had all the information on the forex losses and were involved in the concealment of actual losses.
“Therefore, they should be jointly liable for the offence.”
The commission felt there was basis to recommend formal investigations be carried out into possible offences of CBT and/or cheating that might have been committed by them and the then-prime minister in carrying out speculative forex dealings and/or concealing the forex losses from the Cabinet and Parliament.
The commission found that BNM’s forex dealings from the late 1980’s till 1993 were excessive and speculative for profit and therefore, had contravened Section 31(a) of the Central Bank Ordinance.
It also believes that substantial measures had been taken by BNM in improving the governance on reserves management and that no further enhancements are being recommended.
The inquiry stemmed from an allegation made by former BNM assistant governor Datuk Abdul Murad Khalid on Jan 26 this year that the central bank had incurred total accumulated losses of US$10 billion in the early 1990s, which were greater than the reported amounts by BNM. — Bernama