Forex RCI: Bank Negara losses affected Malaysia’s economy

Although the OPR was maintained at 3%, the central bank said policymakers may consider reviewing the current degree of monetary accommodation, given the strength of the global and domestic macroeconomic conditions.

KUALA LUMPUR: Bank Negara Malaysia’s (BNM) losses due to foreign exchange (forex) dealings between 1992 and 1994 had a huge impact on the nation’s economic development, according to the Royal Commission of Inquiry (RCI).
 
“The huge losses had a significant negative impact on the economy of the country, whereby it deprived the country of development opportunities.

“It also impaired Bank Negara’s ability to fulfil its mandated role as the country's central bank,” said a 528-page report on the RCI findings tabled in Parliament on Thursday.

Bank Negara had incurred losses amounting to RM31.5bil due to its forex dealings between 1992 and 1994, the report confirmed.
 
“BNM's report entitled Accounting Treatment of Losses Arising from Active Reserve Management 1988-1994 (Accounting Treatment Report) stated clearly that losses of RM31.5bil were incurred from 1992 to 1994 from forex dealings.

“As this internal compilation dated April 18, 2007 was based on formal records of the Bank, the Commission has no doubt about the report's accuracy,” said the RCI report.

It added that the total losses was consistent with the figures referred to in the Audit Report on Foreign Exchange Operation Division of Banking Department and Processing Section of Accounts Department as at Dec 31, 1992 dated Jan 21, 1994, pertaining to an investigation into BNM's forex losses amounting to RM12.35bil in 1992.
 
A letter by the Auditor-General also specified a loss of RM15.29bil for 1993 and the 438th BNM's Board Minutes dated Feb 15, 1995 reported a loss of RM3.86bil for 1994.