Boleh Malaysia Finance(BMF) Part One
Posted by adminSaturday, 22 August 2009 11:34By Hakim Joehen a bank has too manydeposits (excessive funds),what does the bank do? Why,they relax their loan requirements to offermore loans out in order to maximize theirprofits. What if the national loanrequirements are already “very relaxed” due to favorable economic conditions inthe country? Why, you loan the excessiveliquidity overseas!
Bank Bumiputera Malaysia Berhad(BBMB), found itself in such an enviablesituation in 1979/1980. This was partlydue to the fact that Petronas was “instructed” to remit RM50 million amonth into its BBMB banking account. Thedilemma that BBMB was facing then washow it was going to lend these excessivecash out when other Malaysian bankswere already in the picture. BBMB could of course lower their interest rates but thepotential profits could not be maximizedand the fact that the other competingbanks could also do likewise was not loston them. Allowing the money to be left inthe bank’s coffers is not productive eitheras BBMB would have to pay interest on it.So, in order to maximize their profits, thetop hierarchy within BBMB decided tochannel these funds out of the countryand Bumiputera Malaysia Finance (BMF)based in Hong Kong, was selected as thevehicle targeting the foreign exchangeand money market operations. GeorgeTan Soon Gin of Carrian was more thanwilling to be the recipient.After the financial debacle, it was reportedthat BMF had lost RM2.5 billion andGeorge Tan was charged and convicted.Not one cent was ever realized from theseloans but the matter of fact was that BMFgave out loans in amounts that exceededits capital. This can only happen if strictinstructions from BBMB were given toofficials in BMF.An Inquiry (with limited powers andrestricted terms of reference) wasinitiated instead of a Royal Commission(just like the MACC case these days). TheInquiry Committee comprising of Tan SriAhmad Nordin, Chooi Mun Shou and RamliIbrahim produced a 6,000 page (13volumes) report after two years of intensive investigations. On paragraph74.2(2) of the BMF Final Report, thecommittee reported that “apart from fewmembers of the staff, the Committee didnot receive the full co-operation andassistance from the Board andManagement of Bank Bumiputera MalaysiaBerhad (BBMB), which was the AppointingAuthority.” The BMF Final Report started off bystating that “There might not have beenCarrian without BMF.” The BMF InquiryCommittee also identified a “ConcertedPlan” by various BMF top officials andGeorge Tan “to make use of BBMB fundsto make money in Hong Kong” during theproperty boom of 1979. This plan wasdivided into three phases where PhaseOne involve the takeover of a Hong Kongpublic-listed company (Mai Hon, whichwas later renamed Carrian InvestmentLimited), the purchase of Gammon Houseat US$200 million (to be resold later toMalaysian Government at US$250 million)and the setting up of Plessey InvestmentLimited (PIL) as the recipient vehicle forthe BMF loans.Phase Two involve the purchase of GrandMarine Holdings Limited (GMH) at HK$800million to be resold later to the MalaysianGovernment at HK$1 billion, and thenecessary cash flow for the CarrianGroup.
Boleh Malaysia Finance (Part One)