‘Forex losses shocked me’

> For­mer BNM chief said he would fix the mess, wit­ness tells RCI


PU­TRA­JAYA: A for­mer Bank Ne­gara Malaysia (BNM) deputy gover­nor said he was hor­ri­fied by the huge amount of losses in­curred by the cen­tral bank due to for­eign ex­change (forex) trad­ing, a Royal Com­mis­sion of In­quiry heard yes­ter­day.

Tan Sri Datuk Dr Lin See Yan, 85, (pix) said the then gover­nor of Bank Ne­gara Tan Sri Jaf­far Hus­sein was wor­ried and shocked, when he was in­formed of the losses and had later told him that he would “fix the mess”.

“I first came to know about the big losses suf­fered by Bank Ne­gara in forex trad­ing from the spe­cial as­sis­tant to the gover­nor, Lee Siew Kuan, in the early 1990s,” Lin said, adding that sub­se­quently, he was in­formed by a friend at the In­ter­na­tional Mon­e­tary Fund (IMF) that the bank had large “open for­ward” for­eign ex­change trans­ac­tions, in mul­ti­ple cur­ren­cies, es­pe­cially in New York and Lon­don and the bank had suf­fered huge losses.

“I went to see Jaf­far and told him what I had heard and he con­firmed the losses. I did ask him how big the losses were and he told me that he was not sure. Jaf­far told me that Tan Sri Nor Mo­hamed Yak­cop was the chief dealer,” said Lin.

“I told Jaf­far, since he did not know the amount of losses and how much more there would be, it was bet­ter we in­ves­ti­gated to find the de­tails of the losses, how they came about and how much more the bank was ex­posed to,” said Lin.

He said Jaf­far agreed that Lee would carry out the pre­lim­i­nary in­ves­ti­ga­tion with the help of one “Datuk Mu­rad”.

He said they found out that the bank had large “open po­si­tions” in mul­ti­ple cur­ren­cies far for­ward in time. “This sim­ply meant that BNM could be sub­jected to fur­ther losses when the time comes for set­tle­ment with counter par­ties.

“As a cen­tral bank, this risk is not ac­cept­able and Jaf­far agreed. When cir­cum­stances per­mit, the bank should close all the “open for­ward” po­si­tions.”

Only then, he said, the bank would know for cer­tain the amount of losses in­curred.

“I told the gover­nor that Nor Mo­hamed should not be al­lowed to deal any more and Mu­rad be al­lowed to take over and close all the ‘open for­ward po­si­tions’.”

He said the bank should cease with im­me­di­ate ef­fect all the future com­mit­ments and Jaf­far agreed.

Jaf­far’s part­ing words to Lin were: “I got the bank into this mess and I will fix it,” adding Jaf­far was an hon­ourable man and that he was too “trust­ing”.

“He let his guard down and wasn’t fully aware of what had hap­pened.”

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