In the 1997 financial crisis 3 major entities were set up to help in the recapitalization and to rescue the failing banks – Danaharta to acquire and manage NPLs from banks, Danamodal to recapitalize those financial institutions whose capital adequacy ratio had fallen below nine percent. They were bailed out using taxpayers money. Have the pu_im_k bankers forgotten?
The fact remains that in the 1985-88 and 1997 crisis, the government, using taxpayers money, bailed out the failing banks. Have the pu_im_k bankers forgotten?
1. When you thought that they cannot be anymore stupid they can still dig a deeper shithole and fall deeper inside the shithole. The Finance Minister is reported (not refuted) to have said :
The thing I find totally repugnant is the Finance Minister using the word “we”. What the hell do you mean by “we”? Why are you including yourself with the banks? Since when do you represent the banks?
Just the other day the same Finance Minister said he had no say over the banks decision making. Really? Then how were the banks “forced” to grant that first six month moratorium on loans in 2020? Please dont tell me ALL the banks in Malaysia volunteered out of the goodness of their hearts to grant a blanket SIX MONTH moratorium in 2020? Dont tell lies. They were simply told to grant the moratorium. And all the banks toed the line.
(For the record I am not saying I agree or disagree with the banks. But be accurate in what you say.)
The problem with our financial system is that the “ketuanan Melayu” policies of UMNO decided that the banking sector should be controlled by bumiputras – in the guise of the GLCs. Control of the banking sector was used as a political tool – among other things to “control” the Chinese. The stupid donkeys thought that ‘kalau kita control banking kita boleh control China‘. I have actually heard people say this.
What for? Untuk apa? Why do you want to ‘control the Chinese‘?
Kepala hotak kau. What has happened is that the banking sector has been seriously constrained. Before the 1990s (when the population was 20+ million people) we had over 52 commercial banks, over 25 merchant banks, hundreds of finance and credit companies and our economy grew by 7%, 8% and even 9%. Finance and credit was easily available. And the Ah Long industry only existed in the fringes to “finance the gamblers” and drug dealers.
Now there are 32.75 million people in Malaysia but only six major local banks (anchor banks) to serve them. And our economic growth can barely exceed 5% for how many years already. And the illegal Ah Long industry has taken off – it can almost match the banking industry.
The Ah Long industry now finances legitimate businesses. And the illegal Ah Long industry pays no corporate taxes to the goverment. Jadi setiap tahun Kerajaan rugi berbillion Ringgit kutipan “cukai” sebab Ah Long semua tak bayar cukai.
Tuan-tuan, here is some more simple economics ok. Kalau GDP growth 5%, lepas itu inflation pun 5%, jadi (GDP 5% – Inflation 5%) = 0% growth. There is no real growth in the economy lah.
Itu pasal anak-anak tuan-tuan makin ramai jadi food delivery boy. Atau kerja kontrak cleaning dan cuci jamban. Sudah tak ada pelunag pekerjaan yang baru. Sebab monkeys and donkeys itu nak ‘control the economy’ too much.
And the Chinese pula, they have still been able to prosper even with the GLCs controlling the banking sector. Dan biar saya ucap tahniah sebab yang lagi miskin pula orang Melayu. So what ‘control the economy’ are you talking about?
And you still had GLC run banks that went bankrupt. Siapa ingat lagi Bank Bumiputra? Sudah bungkus. (Sebab setiap hari, Sungai Gombak itu cuci bontot belakang Menara Bumiputra. Feng Shui dia pun tak betul.) And then the Muslim brotherhood fools gave a banking license to the Arab camel sh_gg_rs which was promptly listed as a “terrorist funding bank” by the Americans. Can you donkeys still remember?
“the US Senate’s Permanent Subcommittee on Investigations found ..“links to terrorist financing among its customer banks, including Riyadh, Saudi Arabia-based Al R… Bank, which had ties to terror groups through its owners”
Soalan cepu mas : Kenapalah kau orang bodoh sangat?
The Finance Minister also does not know that he works for the people. He does not work for the GLC banks. The Prime Minister and the Cabinet Ministers work for the people who voted for them. You do not work for the GLC banks. Even the GLC banks work for the people who voted for them in the elections.
Here is a well crafted letter from a reader Mr Foo Lee Khean (thank you). Mr Finance Minister, please read this letter very carefully.
2. Surat daripada Foo Lee Khean
An Open letter to the Banks in Malaysia
A series of verbal jousting was played out by politicians across the divide over the past month on whether and why the banks in Malaysia should extend a moratorium on the loans to their borrowers.
For more than a decade, our financial systems had been generally calm. And the banks have been building on previous gains earlier i.e post the 1985 – 88, 97 and 2008 crisis gaining the customers trusts of all they do.
The pandemic, now into its 2nd year, is now causing growing economic damage to our country. Rather than responding positively to the call by the man on the street and small business enterprises for the banks to extend a moratorium of their loans, it appears that the bankers viewed the call as unwarranted with no one willing to step in as intermediaries to help the man on the street.
If the banks were to remember, most of you went through some anxious moments during the 1985 – 88 and 1997 crises. In any normal circumstances, the corrective action – just like for any other organizations – should be making financial institutions pay for their actions.
Close it down right after it becomes insolvent. From a moral and ethical standpoint, when things go wrong, it is those who are responsible who should bear the burden of paying for their mistakes and not the public at large.
But for a barrage of government programs, the financial system in our country was pulled back from collapse. The programs implemented resulted in profits being privatized while losses were socialized.
If the public were to recall, a combination of the following brought the economic recession to our country during the period from 1985-88:-
1. sharp decline in commodity prices worldwide,
2. sharp fall in asset prices,
3. a weak export and poor domestic demand that lead to large financial losses for corporations which in turn reduced their ability to service their debts,
4. shortcomings in regulatory and accounting framework for Deposit Taking Cooperatives (DTC) sector as well as inadequate supervision for DTC sector
The magnitude of the recession affected 24 of the DTCs holding almost 3% the financial system deposits and 4 banks, holding almost 4% of the financial system deposits, which were deemed marginally insolvent.
For the 4 banks, the crisis were resolved with the existing shareholders injecting new capital via a rights issue with any shortfall in meeting the capital adequacy requirements supplemented with proceeds from Bank Negara Malaysia (BNM).
And for the 24 DTCs, 11 with relatively small capital deficiencies received loans at concessional rates and were taken over by an appointed bank, 12 DTCs with moderate to heavy losses were absorbed into one single licensed bank, and I large DTC was taken over by a publicly listed company and its finance company subsidiary.
The costs to the country reportedly were equivalent to 4.7% of our GNP for this crisis.
The financial crisis in 1997/98 was deemed as the worst economic crisis our country faced before this pandemic. According to official estimates from BNM, the combined outcome of the economic collapse and property market crash was a massive increase in non-performing loans in the banking system, from about 2% in mid-1997 to nearly 12% percent in July 1998.
3 major entities were set up during this crisis to help in the recapitalization and to rescue the failing banks – Danaharta to acquire and manage NPLs from banks, Danamodal to recapitalize those financial institutions whose capital adequacy ratio had fallen below nine percent, and CDRC, a joint public and private sector steering committee, to facilitate the restructuring of corporate debts through out-of-court settlement.
Building upon the measures introduced post the 1985- 88 and 97 crisis where the regulators tightened its fiscal policies, strengthened its regulatory framework, introduced guidelines on suspension of interests on Non Performing Loans and provision of bad and doubtful debts, establishing a central credit bureau to monitor and improve credit information and halted lending to borrowers in default amongst others, the banking system managed to withstand the next crisis in 2008.
The fact remains that in the above 2 crisis, the government, using taxpayers money, bailed out the failing banks.
With no clear end in sight for the pandemic, banks in Malaysia will have to dig deep and ask themselves some tough questions.
To the Board of Directors in each of the banks in Malaysia, your fiduciary duty does not mean focusing only on returns. Recent opinions expressed in established and developed markets now viewed that not considering and failure to integrate broad environmental, social, and governance (ESG) issues is a violation of fiduciary duty. The purpose of your bank is not just to produce profits, but also to produce solutions to problems in the country and in the process to produce profits.
Agreeing to a moratorium and a waiver of late interests by your borrowers would not cause a run on your bank nor would it put it into a near default situation. The banks could still earn a return as your actions are making a positive contribution to society. In fact, ESG oriented institutional investors nowadays viewed such actions – creating long-term value for society as a whole – favorably in their investment
(OSTB : I dont think the GLC banks will understand such high moral values – which will actually generate more profits for them in the long run. This is a country where they have to convene a Kongress Maruah after which they still dont understand what is maruah).
The Finance Minister in a response to the call for a reinstatement of the moratorium said recently that at least 80% of borrowers do not need it as they have resumed repayments after the moratorium granted last year while banks are already giving or offering targeted assistance to borrowers that really require this relief.
The earlier moratorium ended in the 3rd quarter of 2020. According to the Entrepreneur and Cooperative Development Ministry, as at end of the same quarter, already more than 30,000 businesses closed. This naturally leads to a decline in private consumption and investment due to reduced household spending.
As at end of March 2021, the unemployment rate is at 4.7%.
The costs to bring this pandemic under control have pushed the country into spending massively. And this spending will be financed through borrowings. An increase in demand for loans by the government will drive up interest rates. This will have an adverse impact on private investments. The government is also likely to increase taxes to fund this current spending. And this will further lead to already reduced spending by households in the economy.
There would come a time or it is already happening where everyone will be suddenly desperate for cash. When that time comes, if it has not arrived yet, what good would it be for the banks holding the collateral from the borrowers? There will be no buyers.
Granting of moratorium to your loan borrowers is just the tip of the iceberg. Proposing a waiver of the late interests would go a long way in helping and ensuring the circular economy remains turning.
- In the crisis of the past, the tax payers i.e the Malaysian public helped in ensuring the banks remains viable.
- In contrast this crisis has been brought on by unfortunate circumstances and is not the fault of anyone.
- So why can’t the banks rise above the politics and profit motives to help out the same people who have never failed to help you in the times of the crisis which affected your businesses?
- The Malaysian public is your life blood.
- All of us are your customers, one way or another. Unlike past crisis, this crisis is so unusual that it is affects every Malaysian.
- The Malaysian public has done and contributed to your well being in every crisis you have faced.
- Now you too can not only help the people who supported you wholeheartedly in the past but you can also help the overall wellbeing and the future of this country and the generations to come.
Name : Mr Foo Lee Khean
3. When the Finance Minister says that 80% of borrowers are able to finance their bank loans it simply means that many of them are using their savings and reserves to service their loans
- to avoid default with the banks
- to avoid being sued for bankruptcy
- to avoid having their passports restricted
- to avoid their names being blacklisted in CTOS
- to avoid cross defaults in other loans (including their personal credit cards)
- to avoid ALL their current accounts and cheque books being frozen
and many other nasty things that can happen when you default on your loan – to any one bank.
IT DOES NOT MEAN THAT THESE BORROWERS HAVE SUFFICIENT BUSINESS CASHFLOWS. Their cashflows are now close to ZERO.
As I said I cannot say if I agree / disagree with the loan moratoriums. It is difficult to answer.
But may I suggest that the GLC banks ie the banks that are owned by us the Malaysian taxpayers – consider helping the Malaysian taxpayer in this time of need.
As Foo Lee Khean says during the difficult days for the banking industry in 1985-1988 and in 1997 it is the Malaysian taxpayer who bailed out the banks. – http://syedsoutsidethebox.blogspot.com/