AMMB directors must do the honourable thing and resign

THE AMMB Holdings Bhd board of directors should uphold the credibility and integrity demanded of their positions and resign with immediate effect.

Each and every one of the board members appears to have contravened sections 55, 56, 57 and 60 of the Financial Services Act 2013 on requirements for chairman, director, chief executive officer or senior officer and functions and duties of a board of directors.

In an announcement to Bursa Malaysia on February 26,  AMMB informed the market that it has reached an agreement with the Finance Ministry to pay  RM2.83 billion as full and final settlement to claims in relation to its transactions with 1Malaysia Development Bhd (1MDB) and related entities.

The announcement also states the following:

“A provision for RM2.83 billion will be established for the Global Settlement in the final quarter of the Group’s financial year ending March 31, which will translate to a pro forma loss of 93.89 sen per share.

As a result of the Global Settlement, the company will not be proposing any final dividends  for the financial year ending March 31.”

Based on the latest consolidated financial statements of AMMB Group as at March 31, the pro forma effects of the “global settlement” will reduce the net asset per share from RM6.18 to RM5.22.

It will set aside RM2.83 billion for the settlement in its last quarter ended March 31, but assured investors that the bank has enough capital to absorb the hit.

Prior to the announcement of the settlement, AMMB had on November 23, 2015  informed the Bursa that the group has agreed to pay a penalty of RM 53.7 million to Bank Negara Malaysia.  As announced, the penalty pertains to action pursuant to section 234 of the Financial Services Act 2013 and section 245 of the Islamic Financial Services Act 2013 with respect to non-compliance with regulations by AmBank (M) Bhd and AmBank Islamic Bhd, respectively. 

Even though it did not specify the infringements or wrongdoing of AMMB that resulted in the penalty, fine, the explanation in the announcement that the company would undertake and review its internal processes etc subsequent to the fine appears to indicate that the penalty was for the role played by AMMB in the 1MDB fiasco.

Even though AMMB had in its announcement stated that the penalty had no material impact on AmBank Group’s earnings for the financial year 2016, the penalty is deemed a material fact as it was imposed by the banking regulator. Accordingly, as a matter of public interest, this material fact should have been disclosed in the its 2016 annual report.

The quantum of the penalty imposed gives the impression that the infringement or transgression or wrongdoing committed by AMMB Holdings is not something minor that could be addressed with just a warning or reprimand letter but something major.

As for the global settlement, a report in a business daily dated March 2, stated that AMMB had told analysts that it had been given only a few days to negotiate the settlement of RM2.83 billion. In any normal litigation taken against an entity, the said entity would typically respond to say that the matter is now being studied by their lawyers or they are disputing the claim and would contest the claim vigorously.

If AMMB was only given a few days to negotiate, did the board of directors seek legal advice before agreeing to the terms and sum of payment?

As they admitted in their briefing to the analysts on March 1, 2021, it is obvious that AMMB Holdings were aware and have sought and received proper legal advice on their role and responsibility. It would be a breach of their fiduciary duty and responsibility if the Board of Directors had agreed to the settlement and the quantum of RM2.83 billion without seeking prior legal advice on their culpability and role in the 1MDB matter.

Additionally, as a listed entity, AMMB Holdings is subject to Chapter 9 of the listing requirements on disclosure.

​By admitting that the negotiations only took a few days, it is clear that the board of directors is aware and had received legal advice on the culpability of the company in the 1MDB matter for it would not have readily admit and accept culpability and agreed to a settlement of RM2.83 billion with the government in just a few days of negotiation.

The board should be reminded that in the AMMB Holdings annual report, under the section Statement of Corporate Governance, the board had stated the following:

The board of directors of the company (board) is fully committed to ensuring that the company continues to maintain the highest standards in corporate governance, with a view to continuously enhance the value and protect the interests of all stakeholders.

The board believes in being transparent and responsive to stakeholders at all times, with unwavering integrity when conducting business and affairs. 

The company subscribes to and conforms to the principles and recommendations stated as follows:

* Bank Negara Malaysia (BNM) Policy Document on Corporate Governance (BNM Corporate Governance)

* Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities)

* Malaysian Code on Corporate Governance (MCCG) 2012, save for the recommendation that the Board must comprise a majority of independent directors where the Chairman of the Board is not an independent director.

In a foreign news report, it is stated that AMMB’s global settlement with the Malaysian government, Australia and New Zealand Banking Group (), the single largest shareholder in AMMB Holdings with a 23.78% stake said it would take a Aus$212 million (RM681 million) haircut in the carrying value of its stake in AmBank to Aus$850 million. 

Should the directors be held individually and collectively responsible  by the shareholders, especially the minority shareholders, for the dilution of their holdings too? 

Taking responsibility and stepping down is a good first step. Prove to the investing public that each and every one of you are the credible person with integrity described in the AMMB annual report and website. – March 18, 2021.

* FLK reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.

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