FOREIGN exchange losses suffered by Bank Negara Malaysia (BNM) more than 20 years ago amounted to at least RM31 billion over a seven-year period, the Royal Commission of Inquiry into the scandal was told today.

Former BNM staff Abdul Aziz Abdul Manaf told the RCI that the central bank lost RM31.516 billion from 1988 to 1994, but it was unclear how the losses were tabulated.

The media’s requests for Aziz’s statement, which took nearly half an hour to read, were declined by Suhaimi Ibrahim, the conducting officer for the RCI

When questioned by the RCI panel, Aziz,  a former accounts manager at BNM, said he had merely provided an “accounting treatment” and was unable to provide further details on how the losses occurred.

“But surely the net itself has to be reflected in the balance sheet,” the RCI’s chairman, Mohd Sidek Hassan, said.

“I couldn’t see that .. because if you examine the balance sheet, it doesn’t appear.”

RCI panel member Tajuddin Attan had also asked Aziz to explain why the BNM’s reserves appeared unaffected by the losses in the later years.

BNM’s losses in 1992, 1993 and 1994 were recorded as RM8.496 billion, RM17.522 billion and RM2.686 billion, respectively.

“Given the fact that there were losses (along) the way and all of sudden there is an increase in reserves, is there’s a possibility of any explanation?” Tajuddin asked.

The forex losses were previously estimated to have amounted to US$10 billion (RM42.83 billion) by former BNM assistant governor Abdul Murad Khalid in an interview with the New Straits Times in June.

Former prime minister Dr Mahathir Mohamad had said he was told the losses were RM10 billion. The scandal occurred under his administration but he has denied knowledge of BNM’s dealings and said he only knew what was reported to Parliament.

The RCI was set up after the special task force (STF) investigating the scandal submitted that the central bank had lost far more than the sum it declared.

Sidek, the STF chairman who was subsequently appointed to the RCI chair, had recommended that the RCI be established because the STF was unable to delve deeper due to “limitations”.

The RCI will also investigate whether there was an attempt at a cover-up, and whether BNM’s forex trading activities had contravened the Central Bank Ordinance 1958 or other laws.

It is tasked to also recommend suitable action against the parties it finds to be directly and indirectly involved in the scandal, and the measures to adopt against the recurrence of such an incident.

The RCI is rooted in controversy, as opposition politicians allege it was a tool for Putrajaya to distract the public from the current administration’s present day scandals, such as that surrounding state investor 1Malaysia Development Berhad.

The setting up of the RCI also coincides with the appointment of former prime minister Dr Mahathir Mohamad to the chair of opposition pact Pakatan Harapan.

No checks and balances in BNM’s forex dept, RCI told

THE central bank did not have a system of checks and balances in its Foreign Exchange Department, said a former Bank Negara Malaysia (BNM) officer, who is the second witness in the Royal Commission of Inquiry (RCI) into its forex losses two decades ago.

Former auditor Ahmad Hizzad Baharuddin today testified that BNM had “no system of checks and balances” and “supervision over the Foreign Exchange Department was found to be lax”.

Asked by RCI panel member Saw Choo Boon about how it came to be that there was a “total lack of rules” and “disregard for authority”, and why trade volume ran into the hundreds of billions, Hizzad said BNM did not have a “robust computer system” to capture all the transactions then.

Instead, he said, the transactions were manually entered.

The RCI at the Palace of Justice earlier today heard from another former BNM staff member, Abdul Aziz Abdul Manaf, that the central bank had lost RM31.516 billion from 1988 to 1994, but details were unclear as to how exactly the losses were tabulated.

The RCI, chaired by Petronas chairman Mohd Sidek Hassan, was set up to determine the validity of allegations of losses due to foreign exchange speculation, whether BNM’s activities in forex trading had contravened the Central Bank Ordinance 1958 or any other law, and whether there was an attempt to cover up the losses.

The panel is expected to recommend action against parties it finds to be directly and indirectly involved in the scandal, and measures to ensure such incidents do not recur.

Meanwhile, Tan Hock Chuan, who held a watching brief for BNM, had opposed to allowing the statements to be made by the former BNM staff.

He said the audit and accounting losses that Hizzad and Aziz spoke about were based on information that was still classified under the Official Secrets Act (OSA).

He said the two witnesses had not been granted immunity from OSA.

Citing Section 8 of the Commission of Enquiry Act, he said the evidence may not be admissible.

Sidek, however, overruled Tan’s request.

“This is an inquiry. This is not a trial. We are commissioned by the king to do this. I am going to continue this inquiry without delay.  

“If you claim everything to be (classified under) OSA, then why have this inquiry? I will not allow any more debate, we are going ahead,” said Sidek, who is also former chief secretary to the government.

The inquiry will continue on August 24, 29 and 30; and September 6, 7, 18, 19 and 20.

A report on its findings is to be tendered to the king in October.