IN an interview with CNBC in October 2019, governor of Bank Negara Malaysia (BNM) Shamsiah Mohd Yunus said she was comfortable in thinking that financial scandals such as 1MDB will never happen again.

She mentioned that the new government, ie the Pakatan Harapan coalition at the time, has taken a number of steps to prevent such financial scandals from happening again, including structural reforms such as putting in place a framework, a system and a culture that will eradicate corruption, while passing a bill to set up a national body to co-ordinate investigations into financial crimes.

The 1MDB business model – low capitalisation and huge borrowings – was already affirmed as unsustainable from the very start, even back in April 2016 when Abdul Wahid Omar, then economic planning minister, mentioned this in an interview with CNBC’s The Rundown programme.

Wahid went on to say 1MDB’s design was an exception, not the norm, for government-linked companies.

Since that interview in 2019, the government under Perikatan Nasional – which ousted the Pakatan Harapan coalition in February 2020 – pushed for the implementation of 5G in Malaysia with the formation of Digital Nasional Berhad (DNB), an entity wholly owned by the Ministry of Finance.

The DNB business model appeared to be along 1MDB lines, ie low capitalisation and huge borrowings, based on the public statements issued by the government.

Then this year in Apr 2022, the government announced that a private entity, Amanat Lebuhraya Rakyat Bhd (ALR), will take over four highway concessions in the Klang Valley from the existing operators for a total sum of approximately RM5.5 billion.

According to the ALR website, its five directors are also the shareholders of the company.

ALR proclaimed itself as a non-profit entity, the objective of which is to operate these concessions – until the end of the original concession period – without raising the toll rates and then supposedly will hand it back to the government.

Even though it was not officially announced, it is projected that the terms for these concessions will be extended.

ALR also said it will finance the venture through the bond market and financial institutions.

Despite this, it is clear as daylight that the government will be standing as guarantor for the loans and or bonds that ALR will be issuing because the directors do not have financial clout to convince bond investors or the banks that they can guarantee a RM5.5 billion debt.

In the same interview, Shamsiah also said BNM is continually strengthening the compliance culture in financial institutions, so that the financial integrity of our financial system is maintained.

In an announcement to Bursa Malaysia on February 26, AMMB Holdings Bhd, the holding company for AmBank, 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.

Prior to this on November 23, 2015, AMMB informed Bursa Malaysia 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.

The quantum of the penalty imposed gives the impression to the public that the infringement or transgression or wrongdoing committed by AMMB Holdings is something major.

BNM, in its guidelines on fit and proper for key responsible persons, sets out that each individual appointed to the position of a director, CEO, or any person performing a senior management function who has primary or significant responsibility for the management and performance of significant business activities of the bank, and any person who has primary or significant responsibility for key control functions, must have honesty, integrity, diligence, independence of mind and fairness and the skills, experience, ability and commitment to do the job.

Based on this guideline, shouldn’t the directors be held individually and collectively responsible, and be asked to resign their positions in AMMB?

With DNB and ALR, does the governor still hold on to her views that she is comfortable in thinking that financial scandals such as 1MDB will never happen again in this country?

What trust does the rakyat have in the assurances given by BNM, when clearly it failed to even enforce its guidelines on directors it has fined for non-compliance? – May 18, 2022.

* 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.