RCI BEWILDERED BY AGENCY’S MONITORING ROLE

External Reserve Committee oversaw trading at only a limited capacity, panel told

NST TEAM PUTRAJAYA news@nst.com.my

THE validity and function of the External Reserve Committee (ERC) was yesterday called into question by the Royal Commission of Inquiry (RCI) probing into Bank Negara Malaysia’s (BNM) foreign exchange losses in the 1990s.

ERC was set up by BNM to regulate and monitor forex dealings by the bank.

However, the commission’s five-man panel, led by chairman Tan Sri Mohd Sidek Hassan, was puzzled about ERC’s function, following the testimony by witness Datin Essah Yusoff, who was the former BNM fund manager and ERC secretary.

Essah had said although it was true that ERC was tasked with overseeing the forex trading of the central bank, it was at a limited capacity.

“Yes, we did look at forex trading, but not in its totality as we looked at it from the dealer’s position, which is not much.

“It (the ERC) didn’t look at the total position of the forex,” she said during the second hearing of the RCI earlier yesterday.

It is understood from an earlier RCI hearing that dealers were given up to US$125 million, but there was no limit set for adviser/manager at BNM’s Bank Department on foreign exchange dealings.

Bursa Malaysia Bhd chief executive officer and RCI panel member Datuk Seri Tajuddin Atan queried Essah’s admission, noting that this did not gel with the data and information that were given to RCI members in the morning.

“You must forgive me as I flip and skim through this report that was just given to us this morning as you speak,” he told Essah.

“But just skimming through this report, I can already see that there is a trend, because in this ERC report, a note was made on April 24, 1994 of the position of the external reserves. On June 22, 1990, the report also noted the position of external reserves.

“This is replicated throughout the report, therefore the trend indicates that ERC has a permanent agenda on the external reserve position.”

He further queried why ERC was not monitoring forex trading, as forex trading was one of the tools used to further deepen the external reserves, which according to the report in hand, was a primary agenda of ERC.

Fellow RCI member and Special Task Force to Facilitate Business (Pemudah) co-chairman Tan Sri Saw Choo Boon added onto this.

“You were the secretary of ERC, and part of ERC’s objective was to look at the forex trading… but now you said that it didn’t and that you don’t know where it (the alleged RM31 billion loss on forex trading) came from,” Saw told Essah.

“There is an agenda item that says ‘external reserves’ (in this report). Forex trading is in support of reserve management.

“You would assume that the ERC would also look after trading, but you said it didn’t,” he said, in bewilderment.

The RCI later thanked Essah for her admission and called on a new witness. The proceedings continue.

Yes, we did look at forex trading, but not in its totality as we looked at it from the dealer’s position, which is not much. It (the ERC) didn’t look at the total position of the forex. DATIN ESSAH YUSOFF Former Bank Negara Malaysia fund manager and External Reserve Committee secretary