Zeti: No one single entity will pose systemic risk


  • Business
  • Wednesday, 28 Jan 2015

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah and Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz at the signing ceremony for the setting up of a World Bank Group office in Kuala Lumpur.

PUTRAJAYA: Bank Negara will not allow any “systemic” effect from an individual company to impact the country’s economy, according to governor Tan Sri Dr Zeti Akhtar Aziz.

“We will never comment on an individual entity, but we have arrangements to deal with it so that no individual entity will have a systemic implication on the overall financial system of our economy,” she said when asked on 1Malaysia Development Bhd (1MDB)’s huge outstanding debts.

Zeti was speaking to reporters after a signing ceremony where the Malaysian Government and the World Bank Group signed an agreement for the establishment of a World Bank Group office in Sasana Kijang, Bank Negara in Kuala Lumpur.

Zeti said it was not up to Bank Negara to decide on the extension given to 1MDB but the lenders.

“In the case of any extension being provided, that is not by Bank Negara; it is from the lenders who are the commercial banks. They made those decisions,” Zeti said.

Asked if the investments have been brought back from the Cayman Islands, she said: “We do not comment on individuals.”

1MDB had earlier missed a payment on a RM2bil bridge loan that was due last year to local lenders. That hit its bonds and fuelled investor concerns about the country’s economy.

In a report yesterday, Bloomberg said that 1MDB was planning to seek another one-month extension on the RM2bil loan to give it more time to sell a stake in its energy unit.

On another note, Zeti said the country’s gross domestic product (GDP) growth for 2014 was expected to be within forecast.

GDP growth for 2014 is expected to be between 5.5% and 6% and has been revised down to 4.5%-5.5% this year from the initial forecast of 5%-6%.

Zeti said the country’s projected inflation rate of between 2.5% and 3.5%, highly capitalised banking system and credit growth of 10% supported sustainable growth.

In addition, she said the ringgit, which is currently trading near its six-year low, did not reflect Malaysia’s strong underlying fundamentals.

“Once the global events settle down and stabilise, the ringgit will trend towards our underlying fundamentals,” Zeti said.

Commenting on the European Central Bank’s quantitative easing (QE) programme, she said if the measures provided financial stability to global financial markets including Europe itself, it would be positive for Malaysia.

“QE provides stability to global financial markets including in Europe itself, this will be positive. We have already experienced the QE from the US and most emerging markets demonstrated their ability to ride out that, including the tapering. Of course, we see surges of inflows and then reversals of these flows,” Zeti said.

Earlier, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said in his speech that the World Bank office here would undertake sharing and research activities.

“It will facilitate Malaysia to share its rich development experience with other developing members. At the same time, Malaysia will benefit from the international experience and expertise of the World Bank Group, particularly in our transformation efforts to become a high income and advanced nation.

“Malaysia has achieved significant progress, among others, in reducing poverty, creating a business friendly environment, developing small and medium enterprises, ensuring financial stability and promoting Islamic finance.

“These will be some of the areas for knowledge sharing. In addition, the office will undertake research in key development areas as well as global indicators for the World Bank Doing Business Report,” Husni said.

World Bank East Asia and Pacific regional vice-president Axel van Trotsenburg said: “Our partnership with Malaysia will boost the World Bank’s ability to remain a source for innovative solutions to help developing countries achieve what Malaysia already has.

“Such knowledge-sharing will be a big gain for everyone, and particularly fitting of nation transitioning to a high income, developed economy.”

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Business , Tan Sri Dr Zeti , Bank Negara , 1MDB

   

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