BNM saga reawakened

The Sun

THE ghost of Bank Negara Malaysia’s (BNM) epic foreign exchange trading losses, said to have run into tens of billions during the 80s and 90s, has reawakened.

Like a dormant volcano whose time to re-erupt has come, the controversy involving the central bank’s infamous speculative practices blew up with such a shudder last weekend that even Tun Dr Mahathir Mohamad was called to respond.

Mahathir, who was prime minister at the time, commented to reporters that he was not afraid to be investigated. The Opposition can open any file they had on him, he said in response to DAP adviser Lim Kit Siang’s assertion that Pakatan Rakyat, should it take over the federal government, must initiate a royal commission of inquiry into the affair.

Other key figures reportedly implicated are the then finance minister Tun Daim Zainuddin and BNM governor during that period, the late Tan Sri Jaffar Hussein. A fourth person, the then BNM deputy governor, Tan Sri Nor Mohamed Yackop, is now a minister in the Prime Minister’s Department.

Although the issue has been raised before, this time it was perhaps more damning and detailed. This is because the individual who spoke about it at a forum organised by the Penang Institute, a state government think-tank, on Saturday was privy to the internal happenings at BNM until 1994.

Dr Rosli Yaakob was a senior manager during the crucial years when the speculative practices were said to occur, and was even on the panel that prepared and presented the bank’s semi-annual brief. He is currently Negri Sembilan PAS deputy commissioner.

Incidentally, Opposition Leader Datuk Seri Anwar Ibrahim, who was finance minister from 1991 to 1998, also spoke at the forum. Anwar maintained that the matter was kept from him after he assumed the post. He has however been accused of covering up for it, including by Lim – the opposition leader and DAP’s Tanjung MP in the early 90s – who held Anwar personally responsible for the losses.

The problem with this whole affair is that there has been neither an official investigation nor an inquiry into the matter to assuage public confusion and concerns. No one, aside perhaps from the perpetrators, knows how much money, if any, was lost or how this was done.

Rosli’s account, delivered to a packed hall seated in stunned silence, would have raised more curiosity about what could have occurred.

Even the volume of money that was supposedly involved has come into question. Lim has put the losses at about RM30 billion. Rosli, however, pointed out that it was once reported that at the height of the speculation BNM had spent RM270 billion. “This is no small amount,” he said.

According to Rosli, the market norm then was to trade in lots of US$1 million, US$5 million or US$10 million, but that BNM traded in US$50 million lots (up to 5-10 lots per call) and sometimes, a few “yards” (US$1 billion per yard) a day.

Its closest rivals were Japanese fund managers who also traded in lots of US$50 million, but only once or twice a year, he said.

If true, this effectively made BNM the largest player in the international currency market, as it is said to have competed head-on against the likes of George Soros.

And Rosli’s indictment was emphatic: “They did not speculate, they gambled and did so recklessly and irresponsibly with no regard for the safety of BNM assets.” Even Alan Greenspan of the US Federal Reserve had warned BNM to stop its speculative activities, he added.

BNM’s strategy was to hit a currency for a couple of yards, and once the initial transaction had gone through, hit it again with another couple of yards, normally only minutes later, Rosli alleged.

“This sent shocks through the market and dealers scrambled to buy the currency, sending it up. BNM sold the currency with a healthy profit,” he said. “But then, other dealers caught on to the scheme. They hit back.”

Rosli specifically pinpointed Jaffar’s appointment as governor in 1985 at the beginning of the foray.

“Previous governors were all against speculation and fiercely defended BNM against any undue outside interference,” he said. “Prior to this, the main thrust of reserve management had always been to preserve the value of the Malaysian ringgit and to maintain liquidity.”

The government should once and for all put this matter to rest with a proper inquiry, to address the inevitable public disquiet on the affair. For after having begun to spew smoke again, this billion-ringgit volcano is not likely to simmer down for some time to come.

Himanshu is theSun’s Penang bureau chief.