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Monday, January 31, 2022

YOURSAY | Asking the wrong question on Genting HK's unsecured loans


YOURSAY | 'Why are banks so generous in granting unsecured loans to big businesses?'

Anwar: Why did govt-linked banks lend billions to gambling firm?

Why didn't Anwar ban local banks from lending to Genting, Zafrul asks

Clever Voter: Genting Group is a diversified group of companies from entertainment to property. The company built its fortune on such businesses. However, like many others, it fell victim to the global Covid-19 pandemic.

Its cruise business was particularly badly hit. It was already well reported in the media, especially on their decision to pull out from a joint venture in Germany.

Business is about taking risks. You win some, you lose some. Bankers lined up to do deals with Genting because they are cash-rich and reliable.

A bad politician shoots from the hip. There are many on both sides. Opposition leader Anwar Ibrahim should consider early retirement as he is no longer relevant in today’s context.

Betul Malu Bukan Maluapa: Anwar, what is so surprising for the three banks – Maybank, CIMB and RHB - to grant US$600 million (RM2.5 billion) in unsecured loans to Genting Hong Kong when its division, Genting Cruise Lines, owns luxurious cruise ships and is a genuine business enterprise.

The name Genting carries weight but unfortunately, like all global leisure businesses, they were crippled by the Covid-19 pandemic.

Karnak: Yes, banks give unsecured loans all the time based on some risk assessment criteria. My concern really is how Genting HK was sufficiently - apparently - ring-fenced from the Genting Group in general.

And if they were, then on what basis were the loans granted? There is no real tie back to the Genting Group in general, except through an individual shareholder's direct and indirect interest.

The Wakandan: Indeed, a prudent man would want his money to be secured. It is just proper.

There are plenty of idiots here who support huge non-secured loans given to borrowers in the name of doing business. And they kind of say, in business 'you win some, you lose some'.

So, they don't blame Finance Minister Tengku Zafrul Abdul Aziz because such unsecured loans were a norm, not an uncommon practice. They are quite okay with losing huge amounts of money.

Now, those who don't want such bankers to manage their money and want their money safe, please raise your hands.

Omissions R Dishonest: Zafrul is avoiding the real question - why the loans were unsecured?

For such huge sums, some security should be obtained. No banks would, or should, take such huge risks.

MS: Zafrul will not dare address the inconvenient fact about unsecured loans. If my knowledge of the industry serves me well, "unsecured" is only possible after other "considerations" are weighed.

"You help me, I help you" is one of the unwritten rules in ‘ketuanan’ banking. Ask any banker.

Malaysia Bharu: "Zafrul also said unsecured loans were not unusual and banks had the freedom to grant such loans based on their risk appetite."

"Zafrul said despite Genting Hong Kong going bankrupt, the banks involved and the Malaysian banking sector, in general, had strong resilience to face challenges."

The finance minister's contention that despite the losses from unsecured loans, our banks are strong, is a cop-out from addressing a serious flaw in the banking sector.

Banks that are so generous to part with the people's money, to businesses that may include rogue businesses and fraudsters, survive the losses by imposing severe terms and punitive conditions to borrowers of secured loans, especially the M40 and B40 (middle and bottom 40 percent) customers that depend on them for housing, car and personal and credit card loans.

The banks insist on tying up everything as security and apply exorbitant interest rates and penalties for even the slightest delays in repayment.

They are fast to go after the securities in the event of default and even to the extent of foreclosures. Some also engage the services of debt collectors who incessantly hound and harass the defaulters.

Probably, this is how banks are generous in granting unsecured loans to big businesses, and as Zafrul contends, “despite having strong resilience to face challenges”.

As long as banks are free to grant unsecured loans to select customers, their victims are the mundane borrowers whose ‘balls’ are tied up over paltry consumer-related loans.

Vijay 47: Zafrul has mentioned two points that should be of great comfort.

First, that in multiracial Malaysia, the Islamic banking sector was progressive enough that it can differentiate between syariah-compliant and conventional assets.

And secondly, that "if the finance minister or shareholders interfered in the daily affairs of banks in Malaysia, it would clearly be wrong from a governance and administrative standpoint”.

Both these statements would generally earn about two sen worth of credibility in the open financial market, even if not accompanied by the now accepted affirmation that “my brother did it”.

As everybody knows, the finance minister’s assurance of laissez-faire is evident only in lofty speeches and never in practice.

That said, we still have to wonder why Anwar seems so concerned that loans were granted by Malaysian GLC banks to Hong Kong gambling houses.

If his anxiety were centred on such loans being extended to offshore banks, or especially without any collateral, that would have been understandable and perhaps praiseworthy. But no, he was upset because the beneficiary was from the gambling industry.

Would the three banks’ generosity have been in order if given to institutions other than Genting?

Anwar, it appears that your Abim (Muslim Youth Movement of Malaysia) days never really left you. Then again, it could be that your private consultant on international banking is PAS leader Abdul Hadi Awang.

Dragonboat: In finance, unsecured debt refers to any type of debt or general obligation that is not protected by a guarantor, or collateralised by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment.

The question is not giving loans to a gambling company. The question is why give "unsecured" loans to a gambling company? Zafrul is avoiding the question. - Mkini

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