Did Bank Negara abused their regulatory power?

Parting shot?

This does not sound like a rational decision on the part of BNM. Thought that such discretionary, bias and impulsive style of decision was only done by Zeti. Then it must be the work of someone thought to already have their monopause but still having their monthly menstruation.

Bank Negara Malaysia (BNM) power as regulator under Banking and Financial Institute Act 1989 and Financial Sevices Act 2013 is so wide ranging, all encompassing and discretionary that it is a surprise opposition or human rights group never questioned it.

It is heard that BNM allegedly abused this power to stop a sizeable loan arranged for a Foreign Company L to undertake a project of significance in Malaysia which was already approved by a certain Commercial Bank H.

Bank H is not headed by any fly-by-night banker, but just like former BNM Governor, Tan Sri Dr. Zeti Akhtar Aziz, banker Y heading the bank received international accolade.

In fact, it was Zeti who approved his extension.

Not sure whether BNM directive to reject the loan was done formally with a proper letter or as what happen to 1MDB, it was merely a verbal instruction.

One COO of a Bank was instructed verbally to not rollover the loan without a formal letter issued. That serve to trigger a near default situation.

It raises the issue whether BNM could abuse their discretionary power just because it is that time of the month for ladies and they just got emotionally attached against a certain organisation or any remote link to that organisation.

If so, god help us.

Corporate Governance

Anyway, this is not the real issue involving parties with Letters encypted from giving clue to their true identity so as to be meant directly to those concern. Off course they should be clever enough to encrypt it.

The issue involves BNM's Principle of Corporate Governance, Minimum Standards and Specific Requirements.

It is not in anyway questioning Zeti's power to approve reappointment of banker Y but on shareholders interest.

Like many banks in Malaysia, Bank H has a major institutional shareholder S. It is a well run institution and around longer than Khazanah Nasional.

Its ability to develop business and build the organisation is far better than Khazanah.

Khazanah was built by one loser Mamak adviser who robbed companies of really capable Malay corporate entrepreneurs and empire builder.

In terms of corporate governance, institution S has check and balance in the system that is far better and capable than MACC's 5 layered committees.

They have never lost RM16 billion on trading foreign exchange like BNM. And media may have been instructed to suppress news of BNM negative capital situation then.

Naturally, any institutional investors like PNB, Tabung Haji, EPF, LTAT, and not to be left out Khazanah would want to have their people represented on the Board of Directors of investee companies.

Where possible, institution S should have controlling presence to provide the strategic direction and implement  the business plan of the investee public company. Logically, when they have majority stake, they must take charge.

It is also their responsibility to minority shareholders who buy the Bank H shares out of their trust in the ability of the major shareholder to manage and provide returns to their investment. In other word, the responsibility to churn out profit, return and dividends lies with the major shareholders.

Though BNM monitors bank profitability and ensure there is no abuse in the pursuit of profit and dividend for shareholders, it is not responsible and answerable to shareholders for any impact of their regulatory actions or intervention on profitability.

Their concern as regulator under the said acts are to see business are conduct ethically and no hanky panky going on.as to not disrupt the financial system.

Banks deals with money and the temptation is always there. It has happened in the past where bank shareholders divert money to their other businesses and cronies or clansmen.

BNM role is to ensure there is public confidence in the bank management to handle public money prudently and responsibility. Thus the requirement that Bank's BOD and Management personnel need to be vetted and approved by BNM.

It would mean the BOD or management must be those with the experience, capability and foresight in managing business, undertanding of public or international policies, and more so banking business.

Interference

Now it is heard that before banker Y was heading the bank, it was run by banker I.

Quite often the practise in corporate governance, former CEO would usually be retained in the BOD to provide a seamless transition in Bank policy making.

Banker I becomes part of institution S's management team and was heard to move up.

As soon as the rumours were circulating, his Directorship in Bank H was not approved by BNM. Not sure what the politics is, but it seemed the BOD manouvred to throw him out.

One can safely assume that they managed to convince BNM to block an important person to represent shareholder S and a majority shareholder from getting their man as representative.

BNM put aside shareholders for self interests of the members of the BOD.

Suitability is a non-issue because banker I formerly headed Bank H and damn well has banking experience.

There is no basis to say he is unsuitable. There is no criminal charges against him or any known offenses committed by him except maybe parking meter as a result of wrong parking by his driver.

Surely it is not about trying to block banker Y from getting an extension and heading the bank.

Off course, unless institution S has someone more suitable with their long term plan, it is supposed to be their internal affair and not for BNM to meddle in.

In the first place, it is unthinkable that shareholders looking for return have no say on the BOD members and management of their investment.

There is no issue systemic risk or contagion effect as all involved are professionals with the sense of responsibility and are people with integrity surpassing the Chairman of the Management Committee of Khazanah.

If the case is top management of institution S should not be involved in day-to-day operation of Bank H, how would BNM reconcile with the presence of Dato Nazir Razak as former CEO to be not just a member of the BOD of CIMB and Khazanah, but an executive Chairman of CIMB?

The executive-ness of his Chairmanship is also another issue. But this posting is not about him but BNM.

Irrational

This does not sound like a rational decision on the part of BNM. Thought such discretionary, bias and impulsive style of decision was only done by Zeti. Then it must be the work of someone thought to already have their monopause but still having their monthly menstruation.

On top of that, BNM has issued to new concept papers on Corporate Governance and Shareholder Suitability [see report here].

The fear now is the possibility that new Act or amendment to existing Act or new rules to be enforced will  make shareholders have no say in the running of their investment and only BNM call the shot.

It has happened in the past where the proposed CEO by the controlling shareholder of RHB Bank was rejected. It eventually led the shareholder to be forced to sell. In that case, the proposed CEO was unqualified but why must BNM meddle in the internal and business affairs of institution S and Bank H?

Supposed there is such need for intervention for reasons beyond the knowledge of the public. Why no such intervention involving Hong Leong Bank and Public Bank was ever done?

Surely it is not racial or just Melayu government servants "segan" behaviour or lack of self esteemed and confidence triggered by inferior complex psychology to deal with Chinese.

Tan Sri Teh Hiong Piow is in his 80s. Not only that the thing can't stand up, the man itself can't stand for long. Definately, he is far from capable of bringing down a government.

It is risky to have him handle public money. He has issues of moral hazard in the past and limited by his physical, emotional and mental capacity in the present.

It is a banking legend that the late Tun Ismail Ali was disgusted with him and refused to accept his hand for handshake. He look up to point up and said, "The sky is blue."

The same happened to Tan Sri Azman Hashim.

If BNM is acting in such irrational and vindictive manner to intrude in organisation's decision making, it is basically moving our banking system backward and inconsistent with best corporate practises.

Remember that in Malaysia, central bankers cannot make commercial bankers. But commercial bankers can be made into central bankers.

* Edited 30/6 1:30 AM