This article first appeared in The Edge Malaysia Weekly on September 25, 2017 - October 1, 2017

Tun Dr Mahathir Mohamad, 92,
former prime minister (1981 to 2003)

On the RM30 billion foreign exchange losses:

“I was not aware of RM30 billion of forex losses suffered by Bank Negara in the early 1990s. I only knew about
RM5.7 billion losses.”

-------------------------------------------------------------
“If I had known the losses were RM30 billion, I would not have said ‘sometimes we lose, sometimes we win’, or ‘sometimes we make profit and sometimes we make losses’, which Anwar and Herbert claimed I said when they met me late 1993. I don’t remember saying this but I do not think it is strange to say something like that because in the late 1980s, Jaffar informed me that the central bank’s forex trading was to balance its reserves and the nation’s economy. What was meant then was there were profits from forex trading by Bank Negara.”

-------------------------------------------------------------
“There was no reason to suspect that Bank Negara had acted against the powers given to it under the law.”

-------------------------------------------------------------
“I did not know that Jaffar decided to take part in active forex trading to balance out the currency volatility to safeguard the reserve and nation’s economy following the negative impact of the Plaza Accord.”

-------------------------------------------------------------

On the RCI:

“Why is Najib only raising this issue now when there was no mention of it previously? The RCI is not about finding out about the losses sustained by Bank Negara but a way to make me look bad in the eyes of the public — that during my tenure, RM30 billion was stolen.”

-------------------------------------------------------------
“However, I think they have not achieved their objective of making me look like one of these kleptocrats who are running the government today.”

-------------------------------------------------------------
“It has been 25 years since the forex losses occurred yet Najib via his ‘helpers’ has succeeded in setting up the RCI in less than 25 days following Abdul Murad Khalid’s
media statement.”

-------------------------------------------------------------

Datuk Seri Anwar Ibrahim, 70,
former deputy prime minister (1993 to 1998), and finance minister (1991 to 1998)

On the losses incurred in 1993:

“I was aware of huge losses amounting to RM9.5 billion in 1993 but I was bound by Bank Negara’s Annual Report 1993 (AR 1993) that was audited by the auditor-general.”

---------------------------------------------------------------
“The AR 1993 showed losses of RM5.7 billion [incurred in 1993] stated as deferred expenditure.”

--------------------------------------------------------------

On why he did not brief the Cabinet if he knew about the huge unaudited losses:

“I cannot use a contentious, false or draft report and inform the Cabinet or Parliament about the actual losses unless it is audited.”

---------------------------------------------------------------
“[Anyway], the Cabinet was aware of the losses; if they didn’t know, then they were sleeping.”

---------------------------------------------------------------
On shoring up reserves:

“We decided on the share buyback of Tenaga Nasional Bhd and Telekom Malaysia Bhd in the 1990s to inject capital into Bank Negara to cover the losses.”

---------------------------------------------------------------

Tun Abdul Daim Zainuddin, 79,
former finance minister (1984 to 1991) and (1999 to 2001)

On Bank Negara’s forex trading:

“Forex trading was utter rubbish. I would have stopped it had I known. That was not the role of Bank Negara. It is to protect our currency, [and] our reserves.”

---------------------------------------------------------------

“I didn’t know of Bank Negara’s policy changes on forex trading, which caused RM9.5 billion losses during the time of Plaza Accord. Everything was kept secret.”

---------------------------------------------------------------
“I learnt about the forex trading and losses in 1994 in a meeting that Jaffar had in London, which was the first time everyone knew. Before that everything was under the Official Secrets Act (OSA).”

----------------------------------------------------------------
“Even [auditor-general Tan Sri] Ishak Tadin did not inform me, and he was under me. When they (Jaffar and Ishak) got to know about the losses, they should have come to see me ... I mean, [one] 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.”

-----------------------------------------------------------------
“Bank Negara is ‘fiercely independent’ of the government and should not be instructed on how to handle its trading activities.”

----------------------------------------------------------------
On why he did not question the officers then:

“On hindsight, RCI panel chairman Mohd Sidek and I can be brilliant when looking at what transpired 25 years ago.”

------------------------------------------------------------------

Tan Sri Nor Mohd Yakcop, 70,
former finance minister (2004 to 2009), Bank Negara adviser (1998 to 2000), Bank Negara banking department manager (1986 to 1994)

“I made a mistake of hedging 100% against currencies in the 1990s.”

-------------------------------------------------------------------
“I was paid to do the job. I could have said why should I take the risk for my own career or family, but I did it for the bank and the country.”

-------------------------------------------------------------------
“Now I am clearly wrong [for hedging], but at that time if I didn’t hedge and the US dollar crashed, I would be accused of not executing my responsibility as the manager. It was part of my job to hedge.”

-------------------------------------------------------------------

“I did not say we did everything right. We did wrong and suffered quietly, but the intention or mindset was to be fair [in doing my job] and that we must learn from our mistakes.”

“All external reserve activities including forex activities were based on strategic considerations.”

-------------------------------------------------------------------
“Admittedly, we misread the turn of the market (the European currencies crash) … we learnt a bitter lesson from these incidents. The forex losses happened. There is no denying it. There is also no denying my accountability for the forex losses. I accepted my fair share of the accountability for the forex losses and resigned from Bank Negara. At that time, it appeared to me to be a sad end to my 25 years of service to the nation, through Bank Negara.”

-------------------------------------------------------------------

Tan Sri Dr Zeti Akhtar Aziz, 70,
former Bank Negara governor (2000 to 2016)

“The Accounting Treatment of Losses Arising from Active Reserve Management 1988-1994 report on April 18, 2007, showed that Bank Negara suffered forex trading losses amounting to RM32.07 billion between 1988 and 1994.”

--------------------------------------------------------------------
“Direct involvement in the reserve management [began] when I was assigned to the London representative office.”

“[We] were allocated US$200 million for investment purposes, later increased to US$500 million for investment by Bank Negara’s London and New York offices.”

“The allocation, which is 1% of the total reserves at any given time, is used to purchase, among others, local currency-denominated bonds in Europe and the US, which requires forex transactions to take place.”

--------------------------------------------------------------------
“I don’t want to make an assessment to what extent Jaffar knew or was a part of, as it is not clear. What is clear is that Jaffar took accountability for it in an honourable way, and resigned.”

“I only learnt of the massive losses through the media in January 1994, when I was assigned to the central bank’s London representative office between 1989 and 1994 but did not know the sum lost.”

--------------------------------------------------------------------

Datuk Abdul Murad Khalid, 64,
former Bank Negara assistant governor (1994-1999)

“The transactions were closed to the management. The governor was not aware.

---------------------------------------------------------------------
“The losses from the currency trading were not reflected in the profit and loss accounts of the central bank, but were instead recorded under the ‘other reserves’ category of the bank’s accounts in order to escape detection.”

---------------------------------------------------------------------
“In 1992, [I] informed Jaffar of US$170 million forex losses based on what was stated by the Chemical Bank in New York, but Jaffar did not believe it.”

--------------------------------------------------------------------
“Jaffar requested that I meet Anwar to explain the forex losses. Anwar, when met, said if the actual losses were made public, he would have to resign as finance minister.”

“I believe that [if] actual losses were revealed, the prime minister, finance minister and Cabinet ministers would have been held accountable.”

-------------------------------------------------------------------

Azman Mat Ali, 54,
former Bank Negara forex dealer (1988 to 1998), currently Bank Negara forex administration department director

“Forex dealings, which led to huge losses in the 1990s, were valued at more than US$1 billion daily.”

--------------------------------------------------------------------
“Late 1980s, Bank Negara was making a profit from forex dealings but it got from bad to worse in the 1990s.”

--------------------------------------------------------------------
“We couldn’t go on forever with the losses, it had to surface eventually. We were hoping for the market to turn our way, but the gap was widening. It was not possible [to keep it
under wraps].”

--------------------------------------------------------------------

Kanason Pothinker, 78,
former senior officer in the Auditor-General’s Office (1985-1992)

“Auditors could not explain why Bank Negara had started on forex trading after 1985.”

-------------------------------------------------------------------
“It was sometime during 1985 till January 1992 [that] I read in local newspapers that Bank Negara’s forex business was something other central banks do not normally engage in.”

-------------------------------------------------------------------
“Attorney-General Chamber’s advisory services head Tan Sri Ainum Mohd Saaid verbally said forex trading was not in compliance of Central Bank of Malaysia Act 1958.”

------------------------------------------------------------------
“Later, Ainum said in writing: ‘Orang atasan cakap jangan campur tangan.’ (The higher-ups said do not interfere.) I am unsure who they are.”

------------------------------------------------------------------

Tan Sri Lin See-Yan, 77,
former Bank Negara deputy governor (1980-1994)

“All accounting matters pertaining to forex trading [was] left to Tan Sri Jaffar Hussein since he was the most reputable accountant in town with the necessary expertise.”

------------------------------------------------------------------
“Forex trading was good till 1991. Losses up to 1992 could be absorbed by the bank still via the ‘Other Reserve’ but by 1993, it was too big for the Other Reserve and it had to be entered as ‘deferred expenditures’.”

------------------------------------------------------------------
“Jaffar’s parting words to me were, ‘I got the bank into this mess and I will fix it’.”

------------------------------------------------------------------

Tan Sri Clifford Francis Herbert, 76,

former Ministry of Finance secretary-general (1991-1994)

“I did my own calculations from Bank Negara documents and reported to Anwar that the bank had suffered RM30 billion losses in forex transactions for a particular year.”

------------------------------------------------------------------
“When told, Dr Mahathir replied, ‘Sometimes we make profits and sometimes we make losses’.”

------------------------------------------------------------------
“In late 1993 or early 1994, Tan Sri Lin told me that Bank Negara was basically insolvent largely due to forex losses because liabilities had exceeded its assets.”

------------------------------------------------------------------

Lee Siew Kuan, 85,
special assistant to Jaffar (1987-1993)

“Tan Sri Lin and I told Jaffar that forex losses from 1990 to 1993 amounted to between RM8 billion and RM9 billion.”

“Jaffar accepted the losses. He did not say anything and looked worried and shocked.”

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.