MALAYSIA Tanah Tumpah Darahku


Wednesday, June 29, 2016

Did Bank Negara abused their regulatory power?

Parting shot?

This does not sound like a rational decision on the part of BNM. Thought that such discretionary, bias and impulsive style of decision was only done by Zeti. Then it must be the work of someone in BNM thought to already have their monopause but still having their monthly menstruation.

Bank Negara Malaysia (BNM) power as regulator under Banking and Financial Institute Act 1989 and Financial Sevices Act 2013 is so wide ranging, all encompassing and discretionary that it is a surprise opposition or human rights group never questioned it.

It is heard that BNM allegedly abused this power to stop a sizeable loan arranged for a Foreign Company L to undertake a project of significance in Malaysia already which was already approved by a certain Commercial Bank H.

The Commercial Bank is not headed by not any fly-by-night banker but just like former Central Bank Governor, Tan Sri Zeti Akhtar Aziz, banker Y heading Bank H has international accolade. In fact, it was Zeti who approved his extension.  

Not sure whether BNM directive to reject the loan was done formally with a proper letter or as what happen to 1MDB, it was merely a verbal instruction to one of the Bank to not rollover the loan and serve to trigger a near default situation.

It raises the issue whether BNM could abuse their discretionary power to indiscriminately just because it is that time of the month for ladies and they just got emotionally attached against a certain organisation or any remote link to that organisation.

If so, god help us.

Anyway, this is not the real issue involving parties with Letters encypted from giving clue to their true identity so as to be meant directly to those concern. Off course they should be clever enough to encrypt it.

The issue involves BNM's Principle of Corporate Governance, Minimum Standards and Specific Requirements.    

It is not in anyway questioning Zeti's power to approve banker Y but on shareholders interest. Like many banks in Malaysia, Bank H has a major institutional shareholder S. It is a well run institution and around longer than Khazanah Nasional.

Its ability to develop business and build the organisation is far better than Khazanah that basically was built by Mamak who robbed the assets of really capable Malay corporate entrepreneurs and empire  builder.

In terms of corporate governance, it has check and balance in the system that is far better and capable than MACC's 5 layered committees. 

Naturally, any institutional like PNB, Tabung Haji, EPF, LTAT, and not to be left out Khazanah would want to have their people represented on the Board of Directors, possibly a controlling presence to provide the direction of the public company.

They have a major stake in it thus they must take charge.

It is also their responsibility to minority shareholders who gave their confidence to buy the Bank shares out of their trust in the ability of the major shareholder to manage and provide returns to their investment.

In other word, the responsibility to churn out profit, return and dividends lies with the major shareholders.

Though BNM monitors bank profitability and ensure there is no abuse in the pursuit of profit and dividend for shareholders, it is not responsible and answerable to shareholders for their regulatory actions.

Their concern as regulator under the said acts are to see business are conduct ethically and no hanky panky goings on. Banks deals with money and the temptation is always there and it has happened in the past where bank shareholders divert money to their other businesses and cronies an clansmen.

Part of it is to ensure confidence in the bank management and require that Bank's Board of Directors and Management personnel are approved by BNM.

It would mean the BOD or management must be those with the experience, capability and foresight in managing business, undertanding of public public or international policies, and more so banking business.

Now it is heard that before banker Y was heading the bank, it was run by banker I. Quite often the practise in corporate governance, former CEO would usually be retain in the BOD to provide a seamless transition in Bank policy making.

Banker I becomes part of institution S's management team and was heard to move up. As soon as the rumours were circulating, his Directorship in Bank H was not approved by BNM. Not sure what the politics is, but it seemed the BOD manouvred to throw him out.

One can safely assume that they managed to convince BNM to block an important person to represent shareholder S and a majority shareholder from getting their man as representative.

Suitability is a non-issue because he formerly headed Bank H and damn well has banking experience. There is no basis to say he is unsuitable. There is no criminal charges against him or any known offenses commited by him except maybe parking meter as a result of wrong parking by his driver.

Surely it is not about trying to block banker Y from getting an extension and heading the bank. Off course, unless institution S has someone more suitable with their long term plan, it is supposed to be the internal affair of institution S.

In the first place, it is unthinkable that shareholders looking for return have no say on the BOD and management of their investment. There is no systemic risk as all involved are professionals with the sense of responsibility and integrity.

If the case is top management of institution S should not be involved in Bank H, how would BNM reconcile with the presence of Dato Nazir Razak as former CEO to be not just a member of the BOD of CIMB and Khazanah, but an executive Chairman of CIMB.

The executive-ness of his Chairmanship is also another issue. But this posting is not about him but BNM.

This does not sound like a rational decision on the part of BNM. Thought that such discretionary, bias and impulsive style of decision was only done by Zeti. Then it must be the work of someone in BNM thought to already have their monopause but still having their monthly menstruation.

BNM has issued to new concept papers on Corporate Governance and Shareholder Suitability [see report here]. The fear now is the possibility that new or amendment to the Act or new rules will be enforce to make shareholders have no say in the running in their investment and only BNM call the shot.

It has happened in the past where the proposed CEO by the controlling shareholder of RHB Bank was rejected which eventually led the shareholder to be forced to sell. In that case, the proposed CEO was unqualified but why must it BNM meddle in the business affairs of institution S and Bank H?

Supposed there is such need for intervention for reasons beyond the knowledge of the public. Why no such intervention involving Hong Leong Bank and Public Bank?

Tan Sri Teh Hiong Piow is too old to be there and be responsible of public money. It is a banking legend that the late Tun Ismail Ali was disgusted with him that he refused to accept his hand for handshake. He look up to point up and said, "The sky is blue." 

Same happen to Tan Sri Azman Hashim.

If BNM is acting in such irrational and vindictive manner of decision making and intrustion, it is basically moving our banking system backward and in consistent with best corporate practises. - Another Brick in the Wall

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