Mahathir: Forex losses merely a bet Bank Negara lost

Mahathir tries to pre-empt the RCI investigation into the US$10 billion Bank Negara forex scandal by giving his version of events

(Malaysiakini) – Dr Mahathir Mohamad claimed that Bank Negara’s foreign exchange (forex) losses were due to the bank’s failure to foresee the impact of the Maastricht Treaty which led to the formation of the European Union and a single currency.

The former premier said Bank Negara had decided that part of the management of the country’s reserves included trading in currency to sustain the value of the reserves.

“Of course, trading in currency is a very profitable business. Many hedge funds trade in currency. But it also carries a risk. You may make a profit or you may lose. And what happened was that they did not foresee the decision of the Maastricht Treaty.

“And they lost in their betting. How they lost? I don’t know. I was told that they were doing currency trading but I was not informed of the details and all that,” he told The Malaysian Insight in an interview.

The Maastricht treaty was signed on Feb 7, 1992.

Mahathir said Bank Negara subsequently submitted a report to Parliament on how much it had lost.

“That is all the government knows,” he said, adding that currency trading is a fast moving business and Bank Negara prided itself at being skilled in it.

“They (Bank Negara) opened an office in London and I was invited to open that trading room. But other than that, I don’t know. And eventually, they lost money. When they lost money, the government decided to close it down, to stop all the trading,” he said.

Asked how much were the losses, the former premier said he could not remember the exact figure but was informed it was around RM10 billion.

He also said Bank Negara’s late governor Jaffar Hussein was responsible for the losses as he started the currency trading room while Nor Mohammad Yakcop was in charge of the trading.

Quizzed on Deputy Home Minister Nur Jazlan Mohamad claiming that Jaffar was being made the scapegoat, Mahathir said this was Nur Jazlan’s view because Jaffar is his father-in-law.

“He’s not going to admit. But the fact is that Jaffar admitted he made a mistake and he, as well as Nor Mohamed, left the bank after that,” he said.

Mahathir also claimed that when Prime Minister Najib Abdul Razak was a member of his cabinet, the latter did not object to currency trading.

The forex losses are now being probed by a Royal Commission of Inquiry (RCI), which, among others, is tasked with determining if parliament and cabinet were misled on the matter.

Critics have accused the Najib administration of deliberately focussing on an old scandal while ignoring the current 1MDB imbroglio.