PUTRAJAYA: The validity and function of the External Reserve Committee (ERC) was today called into question by the Royal Commission of Inquiry (RCI) probing Bank Negara Malaysia's (BNM) forex losses in the 1990s.
The ERC was set up by Bank Negara to regulate and monitor foreign exchange (forex) dealings by the bank.
However, the commission's five-man panel, led by chairman Tan Sri Mohd Sidek Hassan, expressd their puzzlement over the ERC’s function following the testimony by witness Essah Yusoff, who was the former Bank Negara fund manager and secretary to the ERC.
Essah had earlier disclosed that although it was true that ERC was tasked with overlooking the forex trading of the central bank, it was at a limited capacity.
“Yes, we did look at forex trading but not in its totality as we looked at it from the dealer's position, which is not much. It (the ERC) didn't look at the total position of the forex,” she said during the second hearing of the RCI earlier today.
It is understood from an earlier RCI hearing that dealers were given up to US$125 million, but there was no limit set for adviser/manager in BNM's Bank Department on foreign exchange dealings.
Bursa Malaysia Bhd chief executive officer Datuk Seri Tajuddin Atan and RCI member queried Essah's admission,noting that this did not gel with the data and information that was given to the RCI members just this morning.
“You must forgive me as I flip and skim through this report that was just given to us this morning as you speak,” he said to Essah during the proceedings.
“But just skimming through this report, I can already see that there is a trend because in this ERC report, a note was made on April 24, 1994 of the position of the external reserves. In June 22nd 1990, the report also noted the position of external reserve. This is replicated throughout the report therefore the trend indicates that the ERC has a permanent agenda on the external reserve position.”
He further queried why the ERC was not monitoring forex trading, as forex trading was one of the tools used to further deepen the external reserves, which according to the report in hand, was a primary agenda of the ERC.
Fellow RCI member and Special Task Force to Facilitate Business co-chairman Tan Sri Saw Choo Boon added onto this.
“You were the secretary of the ERC, and part of the ERC’s objective was to look at the forex trading… but now you said that it didn't and that you don't know where it (the alleged RM31 billion loss on forex trading) came from,” said Saw to Essah.
“There is an agenda item that says “external reserves” (in this report). Forex trading is in support of reserve management - you would assume that the ERC would also look after trading, but you said it didn't,” he said, in bewilderment.
The RCI committee later thanked Essah for her admission and called on a new witness. The proceeding continues.