Losses hidden by use of unconventional accounting treatments — RCI
The report noted that the losses were hidden by use of unconventional accounting treatments such as booking losses to reserves in the balance sheet.
Another mechanism was the absorption of the remaining losses by transfer of shares from the government to BNM to bolster the balance sheet and the creation of a ‘deferred expenditure’ item in the balance sheet to be amortised over 10 years.
“No further action was taken by the minister of finance and the Treasury secretary- general (as a board member) despite they being informed by the auditorgeneral on the losses and the unusual accounting treatment,” said the report.
The commission reported that from the extract of the minutes of three cabinet meetings held on March 30, April 6 and April 13, 1994, the then- finance minister who chaired the meeting on March 30, 1994, as deputy prime minister, made no mention of the actual losses of RM12.3 billion for 1992 and RM15.3 billion for 1993. The losses for 1993 were reported as RM5.7 billion.
The then-prime minister who chaired the meeting on April 6, 1994 did not correct or offer more information when the forex losses for 1993 were recorded as only RM5.7 billion.
“It could be proven that several persons from BNM, Finance Ministry, Auditor- General’s Department, BNM board of directors and minister of finance had all the information on the forex losses and were involved in the concealment of actual losses in BNM’s forex dealings.
“Therefore, they should be jointly liable for the offence,” it said.
The commission felt there was basis to recommend formal investigations be carried out into possible offences of CBT and/or cheating that might have been committed by them and the then-prime minister in carrying out speculative forex dealings and/or concealing the forex losses from the Cabinet and Parliament.
The commission found that BNM’s forex dealings from the late 1980’s till 1993 were excessive and speculative for profit and therefore, had contravened Section 31(a) of the Central Bank Ordinance 1958.
Meanwhile, the commission believed that substantial measures had been taken by BNM in improving the governance on reserves management and that no further enhancements were being recommended.
The inquiry stemmed from an allegation made by former BNM assistant governor Datuk Abdul Murad Khalid on Jan 26 this year that the central bank had incurred total accumulated losses of US$ 10 billion in the early 1990s, which were greater than the reported amounts by BNM.
He alleged the said losses were caused by speculative forex trading activities by BNM then and that there was no investigation carried out despite these huge losses. — Bernama