This article first appeared in The Edge Financial Daily on September 19, 2017 - September 25, 2017

PUTRAJAYA: Describing Bank Negara Malaysia’s (BNM) currency trading activity in the 1980s and 1990s as “utter rubbish”, former finance minister Tun Daim Zainuddin said he would have stopped the activity if he had known that the central bank was actively involved and saw losses in billions.

“That was not the role of BNM. Their role is to protect our currency, [and] our reserves. If I had known, I would have stopped it. This whole trading was utter rubbish,” Daim told reporters after testifying at the Royal Commission of Inquiry (RCI) into the BNM foreign exchange (forex) scandal.

Daim, who served as finance minister between July 1984 and March 1991, said he only learnt about the forex trading and losses in 1994 from then BNM governor Tan Sri Jaffar Hussein during a meeting in London.

“That was the first time everyone knew. Before that everything was under the Official Secrets Act (OSA). Even the auditor-general of Malaysia [then], Tan Sri Ishak Kadin, did not inform me, and he was under me.

“He did not even tell me or ask my opinion. When they got this, they should have come to see me ... I mean, must be responsible to the country. If you see something wrong, why didn’t you report to me?

“Instead, there were exchanges of letters and they were under OSA. How can I know? And no one will say anything. Of course, they said if OSA, everyone who knows would be charged. But, it depends on the government to charge or not,” said Daim.

During his testimony, the fomer minister was repeatedly asked why he did not take action against BNM’s forex trading during his tenure as the minister as required under Section 34 of the Central Bank Ordinance 1958 (which has since been replaced by the Central Bank of Malaysia Act 2009).

Daim replied that BNM is “fiercely independent” of the government as provided for by legislation and should not be instructed on how to handle its trading activities.

To which, RCI panel chairman Tan Sri Mohd Sidek Hassan said: “So, although BNM is independent, it is governed by the Act where under Section 34, the board would keep the minister informed of policies pursued by the bank.

“Also under Section 34(2), a minister may from time to time, if he disagrees with the board on the policy pursued, can issue a directive. Meaning that it is implicit that you don’t interfere but tacitly agree to the policy [unless] you abdicated your responsibility.

“[But] you are saying they (BNM) did not inform you despite your fiduciary duty or supervisory responsibility as the minister. So you didn’t hear, know and didn’t care, right?”

Daim replied “yes”, adding that on hindsight, Mohd Sidek and he could be brilliant when looking at what transpired 25 years ago.

Asked about the possibility of the finance minister gaining access to BNM’s reports based on the fact that the ministry is represented in the BNM board by the Treasury secretary-general, Daim maintained that he was not informed of the matter by anyone.

“The onus was on BNM to inform the ministry of the trading,” he said.

Asked why he did not take the effort to look into the case after it became public knowledge following media reports then, Daim said: “Where was the public knowledge?

“If nothing was said to me, I cannot do anything. It was all a secret, even to me. But, I had many other things to do, too,” he said.

He added that when he was the finance minister, the ministry had representatives in 1,200 companies and none of them reported to him directly.