‘Freedom to implement policies for benefit of the nation’
COVER FEATURE
THE following are excerpts from the interview:
Question: Can you share with us the mood and morale of the staff as a whole when a career Bank Negara personality was named to succeed Tan Sri Dr Zeti Akhtar Aziz amid speculation that someone from outside the central bank would likely be appointed? Answer: I think it is more a sense of relief and pride as we are able to basically chart our path forward and because we have put in place many plans. For instance, we have had the Financial Sector Blueprint in place since 2011, so the continuation of implementing those action plans, I think, is very important because there won’t be any hiccups. So far, the implementation of those plans has been going smoothly and there is continuity. I think that is the most important thing.
Q: You joined Bank Negara in 1984 and moved up the ranks through the years. In the initial years, did it cross your mind that one day you would be governor? A: I think the most important thing when we start our first career is that we just want to do our level best. I was a bank scholar, so, getting a place at the central bank was a great privilege for me because of the opportunity to learn about banking and the economy. This was something I had been looking forward to since I was in school. So joining the central bank was a dream come true for me, career-wise.
Q: How would you describe your predecessor Tan Sri Dr Zeti Akhtar Aziz?
A: Exemplary leadership. She gave a lot of space for us to grow. For a lot of us in the bank. She gave a lot of opportunities for us to fully realise our potentials, to give us autonomy in managing some of the major policies that the bank had embarked on. I think this is her biggest achievement — to develop leaders for the future.
Q: How difficult is it to step into Zeti’s shoes?
A: We started from the grassroot, so basically we have learnt from the ground up. What Zeti had done over many, many years (she was with Bank Negara for 35 years) was to prepare many leaders below her so that we are always ready to take responsibilities and challenges. So, investment in human capital is extremely important.
Q: When will we begin to see your signature appearing on our ringgit note?
Answer: (Breaks into a laugh). It will take some time, three to four months. We order our currency notes on a regular basis. Once the stock has been exhausted then we replenish with new stocks. That’s when the signature comes in. That question caught me by surprise.
Q: What is your most memorable and challenging situation in handling a financial crisis?
A: There are many challenging things that we have faced at the central bank. If you look at our history, even in the 1980s and 1990s, there were a few crises, though not as big as the Asian financial crisis. For example, (that of ) the cooperatives, deposit taking and earlier, there were issues relating to the property sector boom during governor Tan Sri Ahmad Mohd Don’s time. The 1997/1998 Asian financial crisis certainly is one of the most challenging that the central bank faced because we had to come up with unorthodox policies that were heavily criticised by the world at large. It’s very ironic that now, it has become the norm, it became mainstream policy. We had no precedent but we were able to come up with some policy measures that were effective and unique for the environment that we faced at the time.
Q: How do you devise and develop these measures?
A: This is where investment in people is extremely important. We invest heavily in our people. We have scholarship programmes, we send people for attachment... (and) exposure in other places, we rotate people within the central bank itself so that they can learn about the various aspects of the bank. Our human capital development has been very strong, and even when I first joined the central bank, I had gone through many phases where I was given many opportunities to develop myself and gain exposure to people. We are continuing that legacy.
The biggest upside on human capital development is when you are faced with difficult and unprecedented issues, people will be able to come together, think as a team and work our way through and come up with measures that we think are most suitable for the country.
Q: Whether there is still freedom in managing policies? A: For many years, Zeti raised this many times, that the central bank is able to come up with many policies. There was no interference from finance ministers, even from Tun Mahathir’s (former prime minister Tun Dr Mahathir Mohamad) time until now. We are given a lot of freedom to implement policies for the benefit of the nation. We have never faced any problems as far as freedom to do the right things.
Q: On the second-quarter gross domestic product (GDP)?
A: We do not have the numbers for Q2, so I really do not know what the numbers will be yet. But as in any monetary policy around the globe, when we look at what level it should Bank Negara Malaysia governor (centre) with his deputies and other officials at the announcement of Malaysia’s first-quarter economic growth in May. Pic by Mohd Yusni Ariffin
be, we always look forward. It’s always a few quarters forward to see how the economy will be developing. We project what will be the growth for the second half of 2016 and the first half of 2017 and take position for interest rates. Figures for Q2 will be up next month, (it’s) too soon to say, but we do have our own projections. Basically, it is very broad, second half will be better than first half. So, monetary policy is always forward-looking and this is important, that action (the July 13 Overnight Policy Rate cut) was preemptive.
Q: How you decide the interest rates and monetary policies? A: Malaysia is an open economy. Our import and export are now about 116 per cent of gross domestic product. Over the last decade, our financial system and economy had been much integrated with the world economy. What happened in the region, in Europe, North America will have an impact on us. We are not isolated, no country in the world is now, except for North Korea. We are in a world so much linked and interdependent financially or economically.
Monetary policy is intended for a domestic economy, even though we look at development outside Malaysia. We will look at (economic) numbers, and our economic models and forecast and decide accordingly when the time comes.
There are so many dynamics when it comes to monetary policy... multiple factors to look at, whether our level of interest rates is accommodative and conducive for economic development, and at the same time, making sure that our
price stability continues.
Q: Impact from Brexit (Britain’s vote to exit the European Union) and a slack in global economy and the need to revert to unorthodox measures?
A: Malaysia, since the 1997/1998 Asian financial crisis, has introduced a lot of reforms. Some were very much fundamental. For instance, consolidating the banking sector from over 60 institutions to 10 and now eight banking groups and these are far-reaching measures we have done. On top of that, we have performed institutional arrangement and developed new entities such as Malaysia Deposit Insurance Corporation, which has strengthened the banking sector in (terms of ) ensuring depositors’ money are fully insured. And we have introduced a lot of measures, such as greater risk management and stronger corporate governance. These have done well... for instance, the excess capital in the banking industry is about RM120 billion. That is huge and shows our capacity to absorb any exogenous shock.
Q: On issuance of banking licences?
A: There were two measures we undertook. We issued five banking licences for Islamic institutions. After that, we issued few more for foreign banks. Sumitomo, BNP Paribas and National Bank of Abu Dhabi to operate in Malaysia... Bank of China and ICBC (Industrial and Commercial Bank of China). The idea is that, we want to trade with our trading partners. We know that trade would increase if banks were in Kuala Lumpur. Any businessman will be comfortable to deal with his or her own bank. For instance, Maybank in Jakarta, our business will go there. We give to the Chinese banks because we want to strengthen financial and trade linkages with China. We have allowed a few Middle Eastern Islamic banks and the National Bank of Abu Dhabi, so that we can strengthen economic linkages as
banks would bring their own network and businesses.
Q: On applications for new banking licence?
A: No (new application now), but under the new law, we can look at the establishment of new banking licences. Keeping in mind the best interest for Malaysia, we would look at the applications to see whether they would benefit our economy and financial sector. We look at value proposition of applications. They must prove that it is in the best interest for Malaysia.
Q: On consolidation of banks?
A: It was the right move... it used to be 10 banking groups, now (it is) eight banking groups. If you look at our domestic banking institutions, they are as competitive as foreign banks. This is a much different picture from 20 years ago, when our domestic banks could not compete with foreign banks. Now they can compete. They can expand their operations outside Malaysia and thrive in the new economies that they operate in. This shows that they are competitive now and this is a big development for the domestic banking industry.
Q: On boutique banks and new financing sources/entities?
A: The Malaysian economy is becoming very complex. It is bigger than before and it is not only banks that should provide financing to the economy. The equity market, bond market should also strive to provide financing to economic agents. This is another area we need to look at — the market-based institutions. For instance, leasing, angel funds, credit companies, factoring and private equity. These are types of financing for certain types of activities, such as startups. Private equity or angel fund is more suitable for that. We need to develop financing from different entities so that the economy can have multiple sources of funding rather than over-relying on the banking sector. Bernama