THE Royal Commission of Inquiry into Bank Negara Malaysia’s (BNM) foreign exchange losses in the early 1990s continues today with its second day of the hearings at the Palace of Justice in Putrajaya.

At its first sitting on August 21, former central bank staff Abdul Aziz Abdul Manaf told the panel that BNM lost RM31.516 billion from 1991 to 1994, but it was unclear how the losses were tabulated. This amount was far greater than the RM9.3 billion in losses the bank disclosed in its 1994 annual report.

Former BNM auditor Ahmad Hizzad Baharuddin had also testified that the bank had “no system of checks and balances”, and “supervision over the Foreign Exchange Department was found to be lax”.

A key witness, former assistant governor Abdul Murad Khalid, said the then central bank governor, the late Jaafar Hussein, had no clue as to the “magnitude” of the losses. Murad himself said he only found out how bad it was “privately”, and blamed former assistant governor Nor Mohamed Yakcop for failing his duties.

Nor Mohamad, who was later made a cabinet minister, had been manager of BNM’s Banking Department overseeing forex trading in the 1980s and also BNM adviser on forex trading from 1991 to 1993, the years when the losses occurred.

Murad, who subsequently took over Nor Mohamad’s forex responsibilities as BNM adviser, also told the panel that then finance minister and deputy prime minister Anwar Ibrahim, was concerned that he would have to resign as finance minister if the true loss of BNM was made public.

The RCI, chaired by Petronas chairman Mohd Sidek Hassan, was set up to determine the validity of allegations of losses due to foreign exchange speculation, whether BNM’s activities in forex trading had contravened the Central Bank Ordinance 1958 or any other law, and whether there was an attempt to cover up the losses.

Other panel members are High Court Judge Kamaludin Said, Bursa Malaysia CEO Tajuddin Atan, Special Task Force to Facilitate Business co-chairman Saw Choo Boon, Malaysian Institute of Accountants member K. Pushpanathan and Finance Ministry strategic investment division director Yusof Ismail.

The Malaysian Insight brings you live updates from the proceedings. – August 24, 2017.

4.30pm: Panel chairman Mohd Sidek ends today’s proceedings with Fizaman as the last witness. The RCI will continue on August 29.

4.20pm: The RCI’s conducting officer Suhaimi Ibrahim quizzes former BNM forex dealer Fizaman on his statement.

Suhaimi: Trading was done under the monitoring of Nor Mohamed (Yackop). All the deals done should be (according to) guidelines. Although Nor gave instructions, who gave the guidelines?

Fizaman: The dealers’ guidelines were given by the Banking Department.

Suhaimi: There were losses in forex trading and according to your statement, you said the ‘management position’ never made profit.

Fizaman: It was not ‘never made any profit’. I meant in total. Weekly or monthly position because it was all over the place.

Suhaimi: If you knew there were losses, why were there no discussions on how to overcome it?

Fizaman: What was decided after a dealer gives his views is not the dealer’s task. Although the market outlook is negative, such decisions were made by Nor Mohamed.

4.15pm: The RCI is hearing from the third witness now, Fizaman Noor Mohammed Nasir, who was a BNM forex dealer from 1989 to 1998. He said he would give his analysis of the world economy and currency predictions to the chief forex dealer and to Nor Mohamed, who was manager of BNM’s Banking Department overseeing forex trading in the 1980s and also BNM adviser on forex trading from 1991 to 1993.

“During my time as a forex dealer, our maximum limit for overnight forex trading was US$30 million (for dealers).

“I am not sure what the overnight limit for the chief dealer (and management) was. The highest trading made in a day reached US$800 million,” Fizaman said.

“Overall, my view is that BNM did not gain any profit in the forex trading done. I do not know how much BNM lost through forex trading,” he said.

3.05pm: Panel member Tajuddin Attan again asks Essah, a former fund fund manager at BNM’s Banking Department from 1990 to 1994, which reports she handled. Essah was secretary of the external reserves committee (ERC).

Tajuddin: “You said the chief dealer will report forex (activities) to Nor Mohamed who is the advisor, and Nor reports to ERC. You were in ERC as a secretary, so the reports were not done by you? What reports did you do?”

(Nor Mohamed was manager of BNM’s Banking Department overseeing forex trading in the 1980s and also BNM adviser on forex trading from 1991 to 1993.)

Essah: “Market reports. The limit for dealers, I prepared, with instructions by Nor Mohamed.”

At this juncture, RCI panel chairman Mohd Sidek chided the witness.

“The commissioners have issues (understanding) and we have witnesses who somehow can’t remember (things),” Sidek said.

2.30pm: Panel member Tajuddin Attan asks Essah who monitored the central bank’s forex traders and ensured guidelines were followed, to which she says: “I don’t know. Forex (activities) were not reported at all. Forex was not reported by me. I don’t know how it’s done.”

Another panel member, Saw Choo Boon, asks where the records of such activities were kept and if the external reserves committee (ERC) looked at these records.

“ERC doesn’t look at it and I’m not sure who looks at it,” Essah replies.

2pm: Proceedings resume after the lunch break with the second witness called, Essah Yusoff, a former fund manager at BNM’s Banking Department from 1990 to 1994.

“I do not know how BNM managed its forex trading in the 1980s, and from 1990 to 1993. With regards to forex trading, BNM was meant to maintain the ringgit’s value at market price.

“I was not involved in forex trading during those years…I was involved in the ERC (external reserves committee) meeting. (It was) Nor Mohamed Yakcop (who was) responsible for forex trading at that time,” Essah told the panel.

12.30pm: Proceedings take a break until 1.50pm.

12.15pm: Wong is asked about about his earlier statement that guidelines on forex trading were not comprehensive.

He replies: “I can’t answer because this is actually (under) the external reserves committee (ERC). And why they didn’t come out with a comprehensive policy to monitor forex trading, I don’t know, because it is beyond me.

“The ERC, I suppose, is the top policy body for forex matters. I’m not involved. I’m not sure,” said the former BNM auditor.

11.25am: Proceedings resume with panel moderator Mohd Saifuddin asking Wong, a former BNM auditor, if anyone from the central’s bank’s Audit Department was placed in the Banking Department.

Wong said: “No internal (auditor) was placed in the Banking Department.”

Asked if he was aware if in 1989, the auditor-general had audited the Banking Department, Wong also said, no.

The Banking Department, at the time, oversaw forex trading activities, according to former BNM assistant governor Abdul Murad Khalid, who had testified on the RCI’s first day of hearings on August 21.

11.15am: The proceedings stop for a 10 minute break.

10.45am: Meanwhile, outside the courtroom, The Malaysian Insight is told by a lawyer that former prime minister Dr Mahathir Mohamad, who is present at the hearing, is not going to testify in the proceedings today but is just here to observe.

Dr Mahathir has accused the government of holding the RCI as a political move to discredit him. The scandal occurred while he was prime minister and he is now leading the opposition pact Pakatan Harapan.

10.40am: Wong tells RCI panel that he has no knowledge whether any party stood to gain from the central bank’s forex trading.

“I don’t know whether anyone in BNM or any party, gained any personal benefit from forex trading, until it caused huge losses to BNM. I don’t know whether there was anyone responsible for these losses faced by BNM in relation to forex trading based on the audit report, because it wasn’t the objective of the audit (to find out) .”

He said based on the 1992 audit report, RM9.2 billion was “lost” from the central bank’s reserves on Dec 31, 1992, due to forex trading activity that cost RM8.5 billion, which had been charged on the account.

“I can’t say the action of charging on the reserves account was right. The financial statement was approved by the auditor-general,” said Wong who worked in BNM’s audit department from April 1993 to January 1996.

10.35am: Wong, an ex-BNM auditor, continues his testimony, saying that the management team of the central bank’s audit department was not told of forex trading activities by BNM.

He said dealers were limited to trading US$125 million, collectively, and as a group they could decide themselves if they wanted to engage in trading or not.                

“(But) trading over this amount stated is left to the decision by the chief dealer and those above him,” Wong said.

10.04am: Former BNM auditor Wong tells the panel that in the bank’s 1992 audit report, forex losses were recorded as RM8.5 billion. 

He said BNM then had a policy on forex trading but it didn’t seem comprehensive, based on observations about the audit report.

“There were checks and balances in BNM in relation to forex trading, but the management team (in charge of it) was not mentioned. I don’t know whether there were adjustments in the financial statements with reasons to cover up the bank’s losses in forex trading.

“The audit’s objective was not to find out the actual losses. Based on the audit, there was a committee established to oversee forex trading by BNM, and it was the external reserves committee,’ Wong said.

9.30am: The first witness is Wong Yew Sen, who worked at BNM for 31 years from 1971 until his retirement in October 2003. Wong said he was in  BNM’s audit department from April 1993 to January 1996. He handled internal audits and reported directly to the central bank’s deputy governor.

“I was not involved in forex trading. I had no access to documents and information about forex trading done by the bank from 1990 to 1994. Neither was I involved in the preparation of the audit report on forex trading,” he told the panel.

9.04am: Former prime minister Dr Mahathir Mohamad arrives in the packed courtroom where the RCI hearing is held.