(Petaling Jaya, Monday): Former Finance Ministry secretary-general Clifford Herbert yesterday expressed confidence that local banks will not face closure as a result of current economic and financial problems.
He said everyone must be convinced of the strength of local banking institutions and they should not listen to rumours.
This is most comforting, but this must be one of scores of such assurances which have been made by top government leaders, ranging from the Prime Minister and Deputy Prime Minister down to Finance Ministry and Bank Negara officials, but they don't seem to be able to overcome the skepticism of the public.
Although Clifford said the public should not be sceptical about the government's assurance that the banking system is strong, the government should urgently address and resolve the confidence crisis in the banking and financial sector.
How can the government expect to restore confidence in the banking and finance sector when it was unable to do anything to check the spectacle in the past three months of Malaysians joining long queues in local banks to take out their savings and then joining long queues in foreign banks to put in their deposits although at much lower interests?
The crisis in the banking and finance sector can only be further aggravated when such shifting of savings from local banks to foreign banks in the past few months led to a liquidity crisis in the local banks, resulting in the sudden withdrawal or cancellation of credit facilities even for productive business and industry - which would not only hurt SMIs, but the very turnaround and revival of the economy.
The Finance Ministry and Bank Negara should adopt a new policy, for the present policy of pretending that such shifting of funds from local banks to foreign banks does not exist provided it is not reported in the mass media, and would therefore not have a contagious effect, clearly does not work - for the people have come to rely on their own sources of information, including rumours.
In a way, the government has created a market for rumours through its lack of transparency and failure to give the people accurate and timely information.
I understand that some RM23.6 billion of funds have been shifted from local banks to foreign banks in the past three months, which is one reason why banks have cut off credit facilities to productive activities unrelated to unproductive or speculative projects.
This liquidity crisis must be resolved immediately, and Bank Negara and the Finance Ministry should convene a meeting of all foreign and local banks to to work out a strategy where local banks have sufficient liquidity whereby no bank would have to withdraw credit facilities for productive activities.
My office has contacted the Finance Ministry and the Bank Negara to seek an appointment with the Finance Minister, Datuk Seri Anwar Ibrahim and the Bank Negara Governor, Datuk Mohd Don on the banking and financial crisis.