BNM must investigate banks’ role in RAM Holdings saga

 

Editorial

Apart from the finance ministry and the Securities Commission (SC), Bank Negara Malaysia (BNM) ought to inquire into why CTOS Digital was allowed to breach RAM Holdings Berhad’s shareholding threshold of 20%.

One of the central bank’s key responsibilities is to promote stability in the banking sector, including by the development of sound financial infrastructure.

In fact, this was the very reason why the ratings agency, then under the purview of BNM, was established in the first place.

This explains the participation of a host of financial institutions as shareholders of RAM Holdings, each with a small stake to prevent any one or more of them exerting dominant influence over its ratings work.

Several have since quietly disposed of their stake, leaving Hong Leong Bank (5.8%), Public Bank (5.325%), UOB (4.2%), HSBC Bank (3.5%), Alliance Bank (3.2%), MUFG Bank (2.1%), Bangkok Bank (0.8%), Deutsche Bank (0.8%) and Boon Siew Credit (0.3%) collectively owning 26.025% of the shares in RAM Holdings.

That combined shareholding ought to have been just enough to deprive CTOS Digital of the three quarters’ support it required to pass the special resolution.

As it turned out, an overwhelming 93.86% present at RAM Holdings’ annual general meeting last Thursday voted in favour.

That Public Bank and Deutsche Bank, collectively owners of 6.125%, voted against the resolution is telling. It suggests that some shareholders may have detected a potential conflict of interests in CTOS Digital’s acquisition of a majority stake and may have expressed concern that it might affect the integrity of the debt market.

While RAM Holdings may now come under the purview of the SC, these financial institutions still come under BNM’s supervision.

Wide-ranging powers given to the central bank by the Financial Services Act 2013 should be more than sufficient to allow BNM to inquire into why some banks saw it fit to dispose of their stake, to whom and under what terms, and why the resolution, which has generated much criticism recently, garnered support from the rest.

Ultimately, it falls on the central bank to send a clear message to all financial institutions that each one has a role to play in the establishment of sound infrastructure on which the economy can be built. - FMT