Athi Shankar | June 3, 2012
Free Malaysia Today
An ex-Bank Negara insider reveals the inside track on the currency speculation undertaken by Nor Mohamed Yakcop and other powerful people about 20 years ago.
GEORGE TOWN: A former Bank Negara insider has named four powerful elites as main players to have caused the central bank’s massive RM30-billion loss in the international foreign exchange speculation scandal some 20 years ago.
In his explosive revelation, retired Bank Negara deputy manager, Dr Rosli Yaakop named former Prime Minister Dr Mahathir Mohamed, ex-finance minister Daim Zainuddin, ex-Bank Negara Governor, the late Jaffar Hussein and current Minister in Prime Minister’s Department in charge of Economic Planning Unit Government Nor Mohamed Yakcop as the “forex scandal elite club masters.”
Rosli told a forum here yesterday Jaffar and Nor were biggest culprits by going overboard in the speculative foreign currency venture.
He said the duo speculated and they gambled recklessly and irresponsibly with no regard to the safety of Bank Negara’s assets.
He revealed that they wanted to beat George Soros, perhaps, to impress their bosses that they were experts in forex dealings.
The former high ranking Bank Negara officer said the forex speculation activities were against the very grain of central bank principles.
He asked on how a central bank can be heavily involved in massive forex speculations when its task was to stamp out excessive speculations?
“Bank Negara’s duty was to protect and strengthen the value of ringgit, not to gamble ringgit in forex market.
“I think it was a deliberate attempt to make money for certain people using Bank Negara as piggy ride,” Rosli hammered home his conclusion during a question-answer session later.
He accused Nor to have directly caused the forex losses given that the Tasek Gelugor MP was the man tasked to speculate, and ultimately gamble, Malaysian Ringgit against foreign currencies.
He said Nor, then Bank Negara advisor in charge of investment department, would use his computer and other staff computers to speculate and gamble in foreign exchange market.
This has led international forex players to believe that Bank Negara had many aggressive market traders.
“But truth is it was Nor Yakcop did it all,” Rosli told the forum titled: “Bank Negara Forex Scandal – When Government Becomes Speculator.”
With ex-banker Julian Candiah as moderator, Rosli and Opposition Leader and former finance minister Anwar Ibrahim were two panelists at the full house forum held at a meeting room in Dewan Sri Pinang.
Organised by state government think tank, Penang Institute, Chief Minister and DAP secretary general Lim Guan Eng delivered an opening speech.
Also present were Penang Institute chief executive officer Zairil Khir Johari and state PKR leaders Law Choo Kiang and Abdul Malek Kassim.
‘Yes Man’ governor
Rosli said the central bank ventured into speculative forex market in a big way during Daim’s tenure as finance minister.
“The order to go and make money in the forex market was from Daim with Dr Mahathir’s blessing,” Rosli disclosed, adding that Jaffar was their “Yes Man” Governor at that time.
He said Bank Negara strategy was to hit a currency for a couple of yards and once the initial transaction has gone through, re-hit it again with another couple of yards normally only minutes later.
This will send shocks to the market and dealers will scramble to buy the currency, sending the currency value up.
Bank Negara would then sell the currency with a healthy profit.
“But then, dealers caught on to the scheme hit back,” said Rosli.
In 1992, he said Bank Negara gambled on the British Pound. It bought the Pound long and George Soros, major player in forex market, short.
When the Pound was devalued, Bank Negara lost USD5.5 billion and George Soros gained USD1.7 billion.
Bank Negara then claimed it was only paper loss of RM9.3 billion.
Rosli said experts estimated Bank Negara’s exposure for having lost that much was USD27 to USD33 billion, which was five times more than its foreign reserves and its entire assets of USD20.7 billion in 1992.
Rosli said that Bank Negara was indeed such a real gambler that Alan Greenspan of the US Federal Reserve warned the central bank to stop its speculative activities.
“But it fell into deaf ears and as a result, the bank incurred more losses in 1993,” he said.
Then Opposition Leader Lim Kit Siang estimated Bank Negara lost a colossal RM30 billion. But Bank Negara claimed RM10.1 billion loss in 1992 and RM5.7 billion in 1993.
“Bank Negara claims of losses were schematically understated.
“Losses were hidden through revaluation of BNM’s gold holding and revaluation of quoted investment,” disclosed Rosli.
Bank Negara was once the largest player in the international currency market and in April 1991, Reuter described it as “a dominant force in the foreign exchange scene for some years.”
Rosli said that reasonable profits made before 1992 – 93 was the impetus incentive for Bank Negara to gamble in forex in a major way.
Although the market norm was to trade in lots of USD1million, USD5 million or USD10 million, he said Bank Negara would trade in USD50 million-lot and USD1 billion-yard a day.
He said Bank Negara would trade up to between five and 10 lots per call and sometimes, a few yards a day.
“That’s real gambling … even closest rival, Japanese Fund Managers, would trade in USD50 million-lot only once or twice a year,” said Rosli.
He said when Anwar took over the finance ministry in 1991, with it the burden of forex losses, everything had gone sour.
“He could only stop further bleeding which he did,” narrated Rosli on Anwar’s ordeal.
Anwar later explained he could only do damage control and some public relations exercise to save the government from further embarrassment.
The Pakatan Rakyat de facto leader said the finance minister and the Cabinet then did not have a clue about the scandal as there were no documents or reports tabled about it.
He said he took initiative to investigate the scandal after being tipped off by Zurich-based journalist friend.
Until then all Anwar knew was that the Bank Negara was only protecting the ringgit in forex market.
Subsequently he took some bold cleaning up decisions after he probed into the bottom of the scandal.
Nor was forced to resign from Bank Negara on July 10, 1994, which Rosli decribed as a grossly insufficient punishment for such a big a crime he committed against the nation.
Anwar said the deal was that Nor shall never be involved with Bank Negara again.
But, in 1997, Rosli said Nor was ‘rewarded’ when he returned to Bank Negara to handle the ringgit crisis.
Jaffar, who died in 1998, was also forced to resign in April 1994. But Rosli said he was also ‘rewarded’ with the appointment of PNB deputy chairman.
He said the masters were Mahathir and Daim, while Jaffar and Nor was given the dirty job to gamble.
He said this was the reason why Jaffar and Nor were left scot-free and rewarded later, and no independent investigation held on the scandal.
Kit Siang’s suggestion for a royal commission of inquiry was ignored and Jaffar even did not bother to attend public accounts committee inquiry.
Due to involvement of people high-up, Rosli said an open investigation would prove politically disastrous as details of the scandal can gruesome and cause damaging embarrassment to the-powers-that –be.
He suggested that Pakatan Rakyat, if were to capture Putrajaya, should re-open investigation on the scandal which was approved by the audience.
He said certain people would have been in jail as criminal elements existed in the forex scandal.
He said the criminal elements were negligence, overstepping of power, falsification of accounts, “creative accounting”, misinformation, breach of trust and corruption.
“But, they had protectors,” he said.