(Petaling Jaya, Monday): Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, said in Malacca over the weekend that Bank Negara is investigating Sime Bank because its problems are "bigger than normal" based on a preliminary report.
He said he had agreed to Bank Negara continuing its investigations into Sime Bank, which will also focus on how the bank incurred such heavy losses within a short span of time and the huge loans given out to several corporate clients.
Anwar added however that the investigations covered only Sime Bank.
Anwar’s statement has given rise to considerable misgivings, implying that there is no need for Bank Negara to investigate into Bank Bumiputra, Abrar Finance and Cempaka Finance - the other three financial institutions which would be in need for capital injection.
Is this because Sime Bank needs capital injection of RM1.2 billion after incurring RM1.8 billion losses for the half-year ended December 31, 1997 - while the other three need lesser amounts, namely RM750 million for Bank Bumiputra, RM25 million for Cempaka Finance and RM7 million for Abrar Finance? Have we reached a stage where it is all right if banking mismanagement involves losses only in millions, tens of millions or even hundreds of millions of ringgit, but not billions of ringgit?
There should be a full investigation as to how, despite stringent Bank Negara rulings going back to March last year, Sime Bank, Bank Bumiputra, Abrar Finance and Cempaka Finance could have incurred such huge losses. Furthermore, there should also be an investigation as to why Bank Negara had failed to prevent the Sime Bank, Bank Bumiputra, Abrar Finance and Cempaka Finance from such losses.
Anwar said investigations against Sime Bank were part of government measures to ensure that the management and monitoring of banks was done efficiently. If so, then the investigations must also apply to Bank Bumiputra, Abrar Finance and Cempaka Finance and not just Sime Bank, or he might be sending out a wrong signal and message to banks and finance companies in the country.
Anwar referred to a preliminary report of Bank Negara into Sime Bank. This preliminary report should be made public to show the government’s commitment to accountability and transparency and its determination to make the banking and financial sector a model of good corporate governance.
The people should be told the truth of the Sime Bank losses, based on the preliminary report of Bank Negara, instead of getting bits and pieces of information from foreign publications.
For instance, the latest issue of Far Eastern Economic Review (March 19, 1998), in an article on Sime Bank entitled "Blue Chip in the Red", reported that internal documents it obtained show that there were few checks and balances, and that regulatory guidelines were not always adhered to, and that Sime Bank also went to great lengths to assist high-flying businessmen in order to retain their business placing at risk the group interests of Sime Darby.
The FEER article reported that Sime Bank’s stockbroking arm, Sime Securities, extended nearly RM1 billion in credit to companies associated with businessman Low Thiam Hock, which was almost two-thirds of the brokerage's entire exposure to investors. Low is the controlling shareholder in Repco, a Sabah-based timber and gaming firm. He also actively traded on the stockmarket.
The FEER article also referred to a Price Waterhouse investigation into "the large exposures in Sime Securities" which concluded in a report dated September 26 that Sime Securities "consistently breached" trading limits for single customers, with exposures reaching RM980 million in May when the approved trading limit was only RM150 million.
The FEER article reported that Low wasn't the brokerage's only client - just the largest one; and that at its peak, the brokerage had total credit of RM1.4 billion outstanding with investors, included businessmen such as shipping magnate Amin Shah. All this occurred after March last year, when Bank Negara ordered banks to reduce their financing of share purchases to 15% of total loans. Sime Bank's exposure to such credit amounted to 22% of its total loans at the end of December.
The stand of the UMNO Youth leader, Datuk Ahmad Zahid Hamidi that the Government disclose to the public the names of those responsible for Sime Bank’s RM1.8 billion loss for the half-year ended December 31, 1997 is most welcome for UMNO Youth had rarely been in the forefront pressing for accountability and transparency whether in government, corporate or banking sector.
I hope that in the forthcoming meeting of Parliament, Zahid and other UMNO and UMNO Youth leaders can stand together with DAP MPs in the national interest to demand higher standards of accountability and transparency in the Sime Bank losses by demanding a White Paper, as it is pointless for Bank Negara to conduct an investigation unless there is the political will and commitment to bring to book those responsible for such colossal losses.
However, it is perturbing that Zahid and UMNO Youth seem only concerned about the Sime Bank losses but not the losses in the other financial institutions. Why is Zahid and UMNO Youth only pressing for accountability and transparency for the losses suffered by Sime Bank but not Bank Bumiputra, Abrar Finance and Cempaka Finance?
Would Zahid also demand that there should be full disclosure of those responsible for plunging Bank Bumiputra into a third banking crisis in 12 years, requiring as much as another RM750 million capital injection after a RM2.5 billion bail-out in 1986 and RM982 million in 1989 and that they should all be brought to book, as well as those responsible for the losses in Abrar Finance and Cempaka Finance?