‘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.”