PUTRAJAYA - Former Bank Negara Malaysia (BNM) governor Tan Sri Zeti Akhtar Aziz said she knew of the central bank's forex losses following a meeting in London with the bank's senior officers.
She said the late BNM governor, Tan Sri Jaffar Hussein, was informed of the massive exposure to the central bank as a result of foreign exchange transactions during the meeting.
Zeti, who was in BNM's London office when the financial scandal took place, said the then assistant governor Datuk Abdul Murad Khalid told Jaffar about the massive exposure to BNM in a meeting at London Apartment where Jaffar was staying in 1992.
"Datuk Abdul Murad told Jaffar regarding the massive exposure to Bank Negara Malaysia as a result of the foreign exchange transactions. As far as I could remember, Abdul Murad did not have the details regarding the foreign exchange transactions," she said.
Zeti, 70, said also present at the meeting was Dr Awang Adek Hussin.
"Jaffar responded by saying that it was probably gross positions that were known by the counter parties that BNM traded with. This counter parties would not be aware of the net positions of the bank and he was of the view that the net positions was very much less," she said.
Zeti, who is the 16th witness was testifying on the fifth day of the RCI proceeding to investigate into losses incurred by BNM due to foreign exchange dealings in the 1990s.
She said she learned about the forex losses suffered by BNM between 1988 and 1994 when there was news of serious concerns regarding the central bank's reserves management.
At that time, she said, she was still on duty at the London office and she reported to the director and adviser of the banking department, Tan Sri Nor Mohamed Yakcop.
"Thereafter I contacted a senior official at BNM to find out what had happened and was told that BNM suffered significant losses in reserve management activities," she said.
Zeti told the RCI that as BNM deputy governor in 2007, she instructed former BNM accounts manager Abdul Aziz Manaf to prepare a report on accounting treatment for reserve management for the year 1988 until 1994 and the report was handed over to her.
She said her reasons for instructing Abdul Aziz to prepare the report was because at that time BNM was in the midst of preparing a new Act to replace the Central Bank of Malaysia Act 1958 and the preparation for the new Act, which started in 2007, was to provide explanation on reserve management mandate, including accounting treatment.
She said changes were also made to the accounting treatment against the profit and losses arising from reserve management which was necessary to give clearer understanding.
Zeti also said BNM took steps to diversify reserve composition and introduce rigorous and robust risk management system, adding that it required knowledge about accounting treatment regarding reserve treatment transactions so that it could be monitored and its risk appropriately assessed and managed.
In reading out her witness statement, Zeti said based on information in a report 'Accounting Treatment 1988-1984', dated April 18, 2007, the total loss was RM32.074 billion after taking into account the profit of RM2.473 billion for the year 1990.
Zeti said Jaffar took accountability of the forex losses in a very honourable way and he resigned.
The governor has to take full accountability on anything that happened, just like in a commercial bank, and If something happened, whether (one) knew it or not, one has to be accountable, she said.
She said the role of both the board and management were very important in the banking and financial institutions.