PUTRAJAYA: There were two different treatments to the recording of Bank Negara’s foreign exchange (forex) trading between the years of 1989 and 1993.
Ishak Ismail, whose last post in the central bank was as accounts manager in the Accounts Department, before leaving in 1995, said this was decided by the Banking Department.
“There were two treatments for forex trading that were decided by the Banking Department. If the Banking Department classified it as ‘trading’ then it will be recorded in the profit and loss (margins) of Bank Negara,” he said during today’s proceedings of the ongoing Royal Commission of Inquiry (RCI) into the 1990s Bank Negara forex losses.
“However, if the Banking Department classifies it as Reserves Management, then the activity’s subsequent profit and loss will be recorded in the Exchange Rate Fluctuation Reserve account.”
Ishak stressed that the Accounts Department did not meddle in the classification of these activities, which was decided by the Banking Department and as such, the Accounts Department would only record the activity in the General Ledger of Bank Negara.
Asked by Bursa Malaysia Bhd chief executive officer Datuk Seri Tajuddin Atan, who is an RCI panel member, during cross examination whether there was any point at which the treatments were interchangeable, Ishak said no.
Tajuddin then noted that it was curious that the central bank would have taken such an aggressive position towards its reserve management, as it was not common accounting practice.
To this, Ishak replied that as the central bank, Bank Negara had the liberty to move beyond common accounting practices as long as it was legal and was beneficial towards the health of the country’s financial stability.
Ishak closed his testimony by noting that as far as he was concerned, there was no cover up of forex trading losses as everything was done in accordance with the accounting policies and procedures that existed at that time.
This statement, however, was contrary to what was shared by former Bank Negara deputy governor, Datuk Abdul Murad Khalid earlier when he said that the central bank had been covering up its forex trading losses of up to RM31 billion between 1991 and 1993.