In the early 1990s, Bank Nega-ra secretly ventured into speculative foreign currency tra-ding, leaving a huge hole in the central bank’s finances and creating a black mark on the nation’s banking history.
Until today, no one knows for sure the exact losses suffered by Bank
Negara and the nation. One esti-
mate said it could be around US$10 billion, which at the exchange
rate then, could be around RM23 billion.
The then prime minister Tun Dr Mahathir Mohamad and his ad-
ministration had strongly denied any wrongdoing.
As such, no one was prosecuted and no investigation was launched despite rendering Bank Negara insolvent at that time.
Yet, Tun Daim Zainuddin, taking the moral high ground, himself said in 1994 that “central banks must not play with fire by venturing into speculative money markets where the risks and losses are high”.
Ironically, it was under his tenure as finance minister from 1984 to 1991 that Bank Negara began dabbling in irregular forex speculation.
He then made way for Datuk Seri Anwar Ibrahim, who knows little about finance, as finance minis-
ter and who later had to oversee
the colossal losses at the central bank.
In fact, as far back as 1989, Bank Negara had already been criticised for speculating on the yen and the US dollar.
In 1991, financial news company Reuters described Bank Negara as a “dominant force on the foreign exchange scene”, and proceeded to detail Bank Negara’s modus operandi, which is to trade in massive lots and hitting banks on the run.
Enter currency speculator George Soros. In 1992, Soros sold the British pound sterling short. Bank Negara bought long.
Then came the European currency crisis and the sterling collapsed. Soros made US$1.7 billion. Bank Negara lost US$5.5 billion. Dr Mahathir called Soros the “robber baron”. But Soros laughed all the way to the bank.
As one commentator said, until today Malaysians are still in the dark. We are unsure as to the exact extent of the damage.
The cabinet decision last Wednesday to form a task force to probe into the forex losses, which will possibly lead to the setting up of a long-delayed Royal Commission of Inquiry, albeit belatedly, is most commendable.
The task force will have a clear job scope of collecting necessary documents and reports and gathering information to shed light on what really happened.
Bank Negara has responded by saying it would cooperate with the task force.
Let’s hope that the membership of the task force will be finalised soon and that it will be able to complete its work in the next few months.
A veteran newsman, A Jalil Hamid believes that a good journalist should be curious and sceptical at the same time