MPs slam sale of NPLs

Foreigners acquiring assets without adhering to rules, say lawmakers (The Malay Mail)

TUESDAY, JUNE 19, 2012 – 12:48
by Ram Anand

1DZULKEFLY: Exercise smells ‘scandalous

MPs from both sides of the divide are united in their concern over revelations that local banks are illegally selling non-performing loans (NPLs) to foreign debt collectors.

PAS’s Kuala Selangor MP Dr Dzulkefl y Ahmad said this exercise allowed foreign parties to acquire assets in Malaysia without adhering to the rules.

“When you talk about NPLs, you are talking about underlying assets, be it houses, cars, automobiles, stock markets or debt instruments, he told The Malay Mail when met at the Dewan Rakyat yesterday.

“When the loans are sold, the assets are also changing hands.”

He said foreign debt collectors were probably buying these NPLs to enable “smart accounting” by showing these loans as ‘tax liabilities’.

“Why they buy is probably because it comes cheaply, and then they can show them as tax liabilities,” he said.

Dzulkefly said that the exercise “smells scandalous” and demanded that Bank Negara regulate which NPLs could be sold to foreign debt collectors and to implement stringent guidelines regarding the sale of local assets.

ABDUL RAHMAN: Giving undesirable parties big stake1

He also said the sale of NPLs did not provide any solution to the debt situation that many Malaysians faced.

“There are so many NPLs in Malaysia. But what the banks are doing does not treat the essential problem of Malaysians having debt. Instead of thinking of ways to prevent this from happening, the banks are selling the loans off ,” he said.

BN’s Kota Belud MP, Datuk Abdul Rahman Dahlan, also expressed his concern after reading The Malay Mail front page report yesterday.

“As long as the debt stays in Malaysia, the banks might use exhaustive ways to recollect debt before going ahead with foreclosure,” he said.

“But if the debt is sold, the foreign banks might not use discretion and go ahead with foreclosure within the stated time. There will be no negotiations with borrowers.”

Abdul Rahman also said the exercise might be a way for foreign parties to obtain valuable properties in Malaysia without going through the restrictions by law.

“What guarantee is there when a foreign bank would then not sell the debt to a third or fourth party? End of the day, we might have undesirable parties having a big stake in the local debt market,” he said.

He said the exercise is reflective of the Unites States’ buying and selling of debts at the height of its financial crisis in 2008.

He urged Bank Negara to investigate the violations to the Banking And Financial Institutions Act 1989 to make sure Malaysia’s debt remains in domestic shores Subang’s PKR MP, R. Sivarasa, said that the exercise could create the bad practice of “creating more nonperforming loans”.

SIVARASA: Practice creating more non-perfoming loans1

“What is Bank Negara doing to monitor these transactions?” he asked.

Petaling Jaya Utara’s DAP MP Tony Pua said there was not much wrong in selling NPLs to foreign debt collectors as foreign parties buying off local loans proved the banking sector was continuing to grow.

“But the disturbing fact here is the element of fraud in the exercise,” he said.

He was referring to prominent bankers involved in the exercise who also hold interest and shares in foreign debt collecting companies or have close relations with them.

“There is a clear conflict of interest here, and I call on Bank Negara to issue a statement responding to this issue,” he said.

The selling of NPLs are only allowed to financial institutions affiliated to Bank Negara and not to foreign debt collectors.

When approached, Deputy Finance Minister Datuk Donald Lim asked for time to respond, while Bank Negara remained unresponsive to queries.

Read: RM60b NPLs in foreign hands

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