THE Royal Commission of Inquiry (RCI) tasked to probe the forex losses suffered by the central bank (BNM) 25 years ago will sit again tomorrow, having heard the testimony of 14 witnesses so far.

The commission has five more days of hearings left, with its last on September 20, after which the commission, led by Petronas chairman Mohd Sidek Hassan, will deliberate and present its findings in a report to the Yang di-Pertuan Agong on October 13.

The RCI came about after former BNM assistant governor Abdul Murad Khalid alleged in an interview with the New Straits Times in June that the central bank had suffered forex losses of around US$10 billion (RM25 billion then), and not the reported RM10 billion reported by the government back then.

BNM said in its annual report in 1994 that the forex losses were RM9.3 billion.

In an interview with The Malaysian Insight, Dr Mahathir maintained that the losses were about RM10 billion and had denied knowledge of the leveraged dealings BNM was involved in.

Opposition politicians have said the RCI is politically motivated and aimed at bringing down Dr Mahathir and Anwar Ibrahim, both of whom are now leading the opposition Pakatan Harapan (PH).

Anwar Ibrahim was finance minister from 1991 and deputy prime minister from 1993 before he was sacked in 1998.

What do we know so far:

1. The forex losses easily amounted to billions

Forex dealers testified that the amount that was traded was at least in the tens of millions daily, with one trader Fizaman Noor Mohammad Nasir, 53, saying that the RCI’s daily trades could reach as high as US$800 million.

Normally, trades were limited to US$30 million per day, said Fizaman, who further testified that the central bank “did not profit from forex trading”.

Murad, and several administrative managers and dealers blamed former BNM assistant governor Nor Mohamed Yakcop, who was in charge of BNM’s forex trading arm then, for allowing high upper trading limits.

According to the witnesses’ testimonies so far, losses suffered 25 years ago appeared to be due a combination of lax forex rules, a lack of administrative oversight and a culture that did not question authority in the face of mounting losses.

BNM’s case is also unique as there has never been any other central bank that has suffered forex trading losses to such a degree.

2. The late Jaffar Hussein, former BNM governor, only knew of the losses by late 1993

A witness, former contract auditor, Lee Siew Kuan, 85, said Jaffar knew of the losses by late 1993. That would be over a year after Murad testified that he first learnt of them in early 1992, when he took over as manager of BNM’s Banking Department.

Lee had alleged that the losses were up to RM9 billion then.

Parliament was informed of the losses in April, 1994.

3. Former BNM staffers or contract officers testified that they did not have full knowledge of the losses

The central bank’s forex trading arm appeared to have a large cast connected to it. Witnesses, including auditors, dealers and administrative managers, called to testified maintained they were operating within their job scopes and never had the full picture of the losses or were oblivious to them until it was too late.

4. There were warnings that BNM had flouted rules

A former senior auditor testified that he raised red flags about the foreign exchange trading carried out by the central bank as it did not comply with rules and regulations.

P. Kanason Pothinker, 78, who was director/assistant auditor general for all federal and state statutory bodies, said he had consulted with the Singapore Monetary Authority over BNM’s activities but his warnings to those in power were ultimately ignored.

What we don’t know:

1. Exactly how much was lost and how the losses occurred

Murad never produced documents revealing how he arrived at the US$10 billion figure, the amount he alleged were the real losses. In fact, the public has no access to documents that witnesses based their statements on.

Only the RCI has copies of the documents that include audit reports that are said to be classified under the Official Secrets Act (OSA).

No audit can be independently verified. The public only has access to the testimonies and the RCI’s questioning of the witnesses.

There is also a cloud of uncertainty as to the exact dates, names and figures that witnesses, some of whom are already in their seventies and eighties, could no longer recall.

2. What Nor Mohamed Yakcop knew

The former second finance minister, who is blamed by Murad and other former BNM staffers for allowing the losses, has yet to testify.

Nor Mohamed was a manager of BNM’s Banking Department in connection with foreign exchange trading in the 1980s and also BNM adviser on forex trading from 1991 to 1993.

Murad said that when he took over from Nor Mohamed, he found that total exposure in forex trades amounted to US$150 billion. BNM had a reserve of only US$20 billion then.

3. What Dr Mahathir and Anwar knew, and when

Some statements contradicted, or were hazy, as to when Dr Mahathir and Anwar learnt of the full extent of the losses.

Former BNM deputy governor Lin See Yan said Dr Mahathir was not informed of the losses, as far as he knew.

He testified that he last met Jaffar in March 1994 regarding the losses but could no longer recall when he met Anwar.

Murad testified that Anwar learnt of the losses by early 1994 whilst on a plane ride to Hawaii and had said that Anwar commented that he would have to resign as finance minister if the public knew about the extent of the losses.

Anwar has denied making those comments to Murad.

At the RCI, former Treasury second deputy secretary-general Clifford Francis Herbert said he learnt of the losses in late 1993, when he was instructed by Anwar to look into the matter.

Herbert, however, said he could not recall the year BNM incurred the losses.

Herbert said he and Anwar went to meet Dr Mahathir in late 1993 regarding the losses.

“I had expected him to be outraged, instead he looked quite normal,” Herbert said of Dr Mahathir when questioned by a conducting officer.

Among its terms of reference, the RCI is to determine the authenticity of the allegation on the losses and whether any laws were broken.

It is also to recommend suitable actions to be taken against those found to be involved in causing the losses and hiding the facts and information on the losses. – September 5, 2017.