Ex-BNM deputy governor: I was shocked at scale of forex losses

(FMT) – A former deputy governor of Bank Negara Malaysia (BNM) told the Royal Commission of Inquiry (RCI) that he was shocked at the scale of the foreign exchange (forex) losses suffered by the central bank about 25 years ago.

Lin See Yan told the five-man RCI that his friends in the International Monetary Fund and a contract officer with BNM, Lee Siew Kuan, informed him about the matter.

“I was horrified when I heard about the losses,” the 78-year-old said in his testimony.

He said he went to see the then BNM governor Jaffar Hussein who confirmed what he had heard.

“I asked Jaffar how big the losses were and he told me that he was not sure,” said Lin who was deputy governor from 1980 to July 1994.

Lin said the late Jaffar told him that the then BNM adviser Nor Mohamed Yakcop was the chief dealer.

“I told Jaffar since he does not know the amount of the losses, we better investigate to get the details,” he said.

Lin said Jaffar agreed that Lee would carry out a preliminary investigation with the help of former BNM assistant governor Abdul Murad Khalid.

The witness said that to his knowledge, Nor Mohamed was reporting directly to Jaffar but was not informed what authority the governor had given to him (Nor Mohamed).

Lee and Murad later informed him that BNM had large open positions in multiple currencies far forward in time.

“This simply means that BNM could be subject to further losses when the time comes for settlement with counter parties,” Lin said.

He said Jaffar agreed with him that, as a central banker, this risk was unacceptable.

“I also told Jaffar that Nor Mohamed should not be allowed to deal any more and Murad be allowed to take over and close all the open forward positions,” he said.

Lin said all accounting matters of BNM pertaining to forex trading were left to Jaffar since he was the most reputable accountant with the necessary experience.

“I must say the late Jaffar was an honourable man but he let his guard down as far as the forex losses were concerned,” he said, adding that Jaffar had promised to fix the matter.

Jaffar, who took responsibility for the fiasco, resigned in 1994.

Lin said the then finance minister Anwar Ibrahim was most unhappy on the forex losses and he also agreed with him that whatever open position that still existed should be closed as soon as possible.

“I was called by Anwar after I had spoken to Jaffar who had also earlier briefed the finance minister,” he said.

Lin, however, said he was not asked to discuss the forex losses with the then prime minister Dr Mahathir Mohamad.

“I am not aware if anyone else did inform the prime minister about the forex losses suffered by BNM,” he said.