PUTRAJAYA – Former Bank Negara Malaysia (BNM) adviser Tan Sri Nor Mohamed Yakcop yesterday confirmed that forex losses happened under his watch and that the central bank paid a steep price for trading in foreign currencies in the early 1990s.
He also admitted that BNM had “misread the market” and took “full accountability” for the losses.
“The forex losses happened. There is no denying it. There is also no denying of my accountability for the forex losses.
“I accepted my fair share of accountability for the forex losses and resigned from BNM.
“At that time, it appeared to me to be a sad end to my 25 years of service to the nation, through the central bank,” he said.
However, Nor Mohamed refuted an insinuation that he solely engineered the massive losses.
Nor Mohamed said this when he testified as the 17th witness in the ongoing Royal Commission of Inquiry (RCI) into forex trading losses of RM31 billion.
His arrival and subsequent testimony at the inquiry had been anticipated as almost all 16 witnesses, including former deputy governor Tan Sri Lin See Yan and former Auditor General Tan Sri Ainum Mohd Saaid, had all testified that he (Nor Mohamed) was the main official in charge of BNM’s forex trading.
“I disagree with the statements made that all decisions with regards to the bank’s forex trading was made alone by myself,” said Nor Mohamed as he read his written statement at the inquiry.
He took almost an hour to fully read the statement from 42 pages.
“I disagree with the statements made that stated I only reported to then governor, the late Tan Sri Jaafar Hussein.
“This is not true as I reported to both Jaafar, the External Reserves Committee (ERC) and sometimes to the Senior Officers’ Meeting where the External Reserves matters were sometimes discussed.”
Nor Mohamed said ERC comprised of the governor, deputy governors and other central bank advisors.
He said he had never, in his capacity as an adviser to Bank Negara reported to the Finance Minister or the Prime
Minister on any issues regarding External Reserves management as that was not in his line of reporting.
“I never discussed about the forex trading conducted by BNM from 1986 to 1993 neither with then Prime Minister Tun Dr Mahathir Mohamad nor Finance Ministers Tun Daim Zainuddin and Datuk Seri Anwar Ibrahim,” he said.
Daim was Finance Minister from 1986 to 1991 before Anwar succeeded him and held the post until 1998.
Nor Mohamed made the testimony when he was asked by Bursa Malaysia Bhd chief executive officer and RCI panel member Datuk Seri Tajuddin Atan.
“Tan Sri (Nor Mohamed), you are made to stand here alone as Jaafar is no longer with us,” said Tajuddin during cross-examination.
“However, your name has cropped up a lot and it appears that all testimonies have links to you. What I want to know is, was it you who made the decision on active trading?”
Nor Mohamed replied: “The decision on active trading was made by the Governor, Deputy Governor as well as the Board in 1985.
“I was not in this decision-making process for this as in 1985, I was not yet made an adviser and not yet part of the upper management.”
Following this line of cross-examination, Nor Mohamed also said that he did not remember who held the authority to set the limits for forex trading from 1986 to 1993.
He divulged that he had never executed any forex trading personally, even though he had the authority to do so, for the sake of transparency.
Nor Mohamed said while the losses suffered by BNM was a bitter lesson, it later helped the country to weather through the turbulent economic storm of the 1998 Asian Financial Crisis (AFC).
“Admittedly we misread the turn of the market that led to the massive forex trading losses of the 1990s.
“But in a strange twist of history; the skills, knowledge and experience acquired from the forex incident gave us the the ingredients to formulate and then later implement the Unorthodox Measures of September 1998.”
According to Nor Mohamed, the Unorthodox Measures provided the nation the ability to frustrate the foreign currency manipulators, whose intention was to destabilise Malaysia and and cause chaos in the socio-economic fabric of the nation.
Unlike Thailand, Indonesia and South Korea, Malaysia was able to overcome the 1998 AFC without borrowing from the International Monetary Fund, the World Bank or any other outside parties.
“The Unorthodox Measures of September 1998 saved Malaysia from dire consequences, following the worst financial crisis in our history and restored the sovereignty and dignity of the nation,” said Nor Mohamed.
“In economic gains, the Unorthodox Measures resulted in the market capitalisation of the Malaysian stock market recovering from a low RM181.5 billion, as at 1 September 1998 to RM578.2 billion, as at 24 March 1999.
“This represented a gain of RM397.7 billion within just seven months,” he said. – NST