Put an end to BNM’s non-core activities — professor
KUALA LUMPUR: Putting an end to Bank Negara Malaysia’s (BNM) involvement in non-core activities, should be one of the main reforms that the new government can embark on, said HELP University Professor Dr Geoffrey Williams.
“Reform is not just about the legal framework in which the bank operates, it is a wider matter of how the bank is managed. One of the first reforms necessary is to end the bank’s involvement in non-core activities,” he said.
The Financial Education Hub, for example, which involved the purchase of 22.55 hectares of land from the government is a prime example, said Williams, adding that the bank’s involvement in this project was at the core of the controversy surrounding Governor Tan Sri Muhammad Ibrahim’s resignation.
The governor and the bank, in a statement on May 24, made it clear that the transaction complied with the governance requirements and laws that governed the bank.
“However, questions remain as to whether these regulations are sufficient to govern such transactions and whether a central bank should be doing this sort of thing at all,” he said in an article entitled: ”Banking on Change at BNM,” in the New Straits Times yesterday.
The functions of a central bank are to manage the monetary system, set monetary policy (interest rates) and act as the government’s banker or “lender of last resort”. Anything else is non-essential.
He opined that Bank Negara had enough on its hands with these core functions, and to involve itself in property development, financial education and estate management had proved a step too far.
“Apart from distracting the bank’s managers from core functions, activities of this type create the perception that the bank’s decisions in financial regulation and supervision might be influenced by its own real estate investments and, worse, that its independence might be compromised if these investments are related, directly or indirectly, to the financing of other government projects, such as 1Malaysia Development Bhd,” he said.
There is an urgent need to end this perception by placing activities, such as the hub, into a separate independent organisation and to change governance systems to avoid such issues in the future, he added. - Bernama