Did MBf’s RM7 million "Raise Our Flag" campaign delay Bank Negara’s takeover of MBf Finance  by two months?

Media Statement
by Lim Kit Siang  

(Petaling Jaya, Tuesday): When Bank Negara took over  control of MBf Finance Bhd yesterday, it said that the country’s biggest nonbank-owned finance company was still solvent and the move was a "pre-emptive action" to put the company on a stronger financial footing.

Bank Negara  said that the  country's biggest finance company with 153 branches requires recapitalisation to improve its financial health and to restore its risk weighted capital ratio to eight per cent. Bank Negara said its  control of MBf Finance would allow it to "restore MBf Finance to a healthy position as well as strengthen its board and management, so as to ensure its viability as a going concern".

Bank Negara should not try to give the impression as if its assumption of control  of MBf Finance is a feather in the cap of the finance company, especially as it is the first time the central bank has taken such a pre-emptive action.  The public are more discerning and this was why the Kuala Lumpur stock market yesterday plunged by 4.18% or 24.48 points to 561.65.

 It has been public knowledge for sometime that all is not well with the MBf Finance Bhd. and the market is worried whether  the Bank Negara’s take-over of MBf Finance Bhd. and Kewangan Bersatu Bhd. (KBB) reflects deeper problems in the banking system.

It has been estimated that MBf Finance, which had RM4.4 billion  in debts at the end of March last year,  has an industry high of over 30 per cent of non-performing loans, and would need between RM400 million and RM1 billion to raise its capital adequacy ratio to safe levels.

It has been reported that Bank Negara was keen to assume control of the finance company as early as the start of last year, and Bank Negara should explain  whether the RM7 million "Raise Our Flag" campaign launched by MBf Finance Bhd. had at least delayed the central bank takeover by two months.


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