Banks flouting the law

Evidence of foreign-controlled companies taking over NPLs despite BNM denial

THURSDAY, JUNE 21, 2012 – 15:26
by Terence Fernandez (The Malay Mail)

CERTAIN banks have been flouting banking and financial regulations in the disposal of non-performing loans (NPL) right under Bank Negara’s nose.

Despite the regulatory body claiming that banks can only dispose of NPLs under strict guidelines, there is evidence that some local banks are taking Bank Negara and consumers for a ride. pg3June21

While Bank Negara says that banking institutions are allowed to sell their NPLs to third parties, there is proof that some of these disposals are not done in accordance with the Banking and Financial Institutions Act (BAFIA) 1989.

“Banks can only sell to locally incorporated companies, whereby the purchaser is majority owned by domestic shareholders, as the purchaser is subject to a foreign equity cap of 49 per cent,” Bank Negara said in a statement, yesterday.

Bank Negara was responding to The Malay Mail’s front-page report on Monday that banking institutions were selling NPLs to foreign-controlled companies in which the banks and sometimes their competitors have a stake in.

However, documents reproduced in The Malay Mail indicated that the debt collecting agencies were not majority-owned Malaysian companies as required by BAFIA.

Sinesniaga Sdn Bhd, for example, lists its shareholders as two Malaysians holding 26 and 25 shares and Standard Bank London Holdings with the lion’s share of 149.

All three directors of Resolution Alliance Sdn Bhd, formerly known as Glorious Flame Sdn Bhd, are foreigners. Its shareholding also illustrates a foreign equity ownership of more than the 49 per cent required by BAFIA — Golden Maestro Sdn Bhd with 51 shares, Orix Leasing Malaysia Berhad (39) and Standard Chartered Bank (Hong Kong) Limited (110).

Mystique Bay Sdn Bhd has two local directors and two directors who are United States nationals; nothing wrong with that, but its shareholding raises questions — Beukhen & Pokhrell (M) Sdn Bhd with 790,051 shares and CVI GVF (Luxembourg) Master S.A.R.L. with 9,122,268 shares.

Bank Negara also said that these financial institutions are permitted to sell their NPLs to non-banking institutions provided that the sale of NPLs is made in accordance with BAFIA.

It went on to say that banks are also required to inform the borrower of the sale of the NPLs and that the sale of NPLs does not affect any debt restructuring agreements.

It also refuted The Malay Mail report that RM60 billion in NPLs have gone out of the country since 2005.

It said that the amount reported “is grossly overstated” and less than RM3 billion.

A study of the Act also reveals that prior approval from the Minister of Finance is needed for the disposal or transfer of the whole of any part of its business to another licensed institution which must be locally incorporated, as well as a resident for tax purposes.

“There are questions over whether some of these debt collecting agencies are, in fact, financial institutions licensed by Bank Negara,” said a lawyer representing a client who is suing his bank for auctioning his home.

The lawyer added that banks are also not permitted to disclose information pertaining to the customer and that the consent of Bank Negara must be obtained before such disclosures can be made.

One thought on “Banks flouting the law

  1. This is Malaysia where all the figures furnished are grossly inaccurate just like the debt the country is in. The debt the country is carrying has gone passed the 53% it gave when the truth of it is so much of the money the country owes are hidden under different names and as I said this numerous times before the only way to stop these shambles is to vote the scumbags and parasites out of Putrajaya in the coming GE. The entire country is in a bloody shamble and don’t let it go on any more.!

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