Bank Negara governor and deputy governor must bear full responsibility for their assurance that they have revealed "not the tip of the iceberg but the iceberg itself" about the banking crisis in the country


Media Statement
by Lim Kit Siang

(Petaling Jaya, Friday): The statement yesterday by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad about the Sime Bank and Bank Bumiputra which needs capital injection of RM1.2 billion and RM750 million resspectively had raised eyebrows, as he again blamed their problems on the devaluation of the ringgit and their share value.

Mahathir said: "They were very sound institutions before but when you knock off their financial strength, then naturally they will suffer".

By the Prime Ministerís logic, there is even no need for Bank Negara to play any supervisory role at all as these banks were "very sound institutions".

Malaysians must be aghast that the Prime Minister does not think there was anything amiss when Bank Bumiputra had to be rescued three times in 12 years - the first time in 1986 when Petronas had to pump in RM2.5 billion to bail it out of insolvency as the result of the RM2.5 billion Bumiputra Malaysia Finance (BMF) scandal and the second time in 1989, when Petronas pumped in another RM982 million after BBMB chalked up losses of RM1.06 billion that year largely due to a monumental provision of RM1.23 billion for non-performing loans. I welcome the statement by deputy governor of Bank Negara, Datuk Fong Weng Phak, rebutting talk among analysts and foreign observers that the four institutions which needed or may need capital injections, namely Sime Bank Bhd., Bank Bumiputra Malaysia Bhd., Abrar Finance Bhd and Chempaka Finance Bhd. represented "only the tip of the iceberg" and that more institutions would follow in the coming weeks with news of recaplitalisation.

Fong said: "What we disclosed is not the tip of the iceberg but the iceberg itself".

The Bank Negara governor and deputy governor should realise that they would be held fully to this assurance that what they have disclosed is not the "tip of the iceberg but the iceberg itself" as far as the banking crisis in Malaysia is concerned and they would be held fully answerable should this prove to be otherwise.

I also welcome the greater preparedness of Bank Negara governor and deputy governor to be more open, accountable and transparent, which is important to restoring confidence.

In line with such openness, accountability and transparency, Bank Negara should respond to the comments of Fitch IBCA, the international rating agency, when on Wednesday it lowered the individual rating of Sime Bank to D/E from C and affirmed the bank's legal rating of 2.

This is the press release of Fitch IBCA when announcing the rating downgrade of Sime Bank after the announcement that it faces a net loss of RM1.8 billion for the six months ended December 1997:

Bank Negara should respond to the various criticisms and comments made by Fitch IBCA.

The Prime Minister has again been making speeches and statements raising eyebrows all round.

Yesterday, for instance, he spoke of "the light at the end of the tunnel" and that Malaysia "is on the path to economic recovery, as the ringgit has appreciated a bit against major currencies and local share prices have risen".

In actual fact, the KLSE benchmark Composite Index fell by 27.09 points to 705.94 on Wednesday and by another 9.15 points to 696.79 yesterday, and it was down another 5.03 points at 691.76 at 12.15 p.m. today. These are also worrying days for the Malaysian ringgit, returning to the low level of 3.9300 against the US dollar yesterday, crashing below the RM4=US$1 level at 10.15 a.m. this morning.

(6/3/98)


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong