Central bank 'had to protect financial system'

Malaysia has a high degree of resilience, says central bank governor Zeti Akhtar Aziz.
Malaysia has a high degree of resilience, says central bank governor Zeti Akhtar Aziz.PHOTO: THE STAR/ASIA NEWS NETWORK

LIMA • Malaysia's central bank had to take action against a debt-ridden state investment company to protect the integrity of the financial system, according to its governor, Tan Sri Dr Zeti Akhtar Aziz.

She said an improvement in the country's political situation would help the ringgit.

The Attorney-General's Office last week dismissed the central bank's second request for criminal proceedings against 1Malaysia Development Berhad (1MDB) for breaching the Exchange Control Act. Bank Negara Malaysia revoked three permissions given to 1MDB for investments abroad totalling US$1.83 billion (S$2.55 billion), and instructed it to repatriate the amount.

"He has the right to make that assessment," Dr Zeti said, referring to Attorney-General Mohamed Apandi Ali. "But for the central bank, we believe it is very, very important to comply with our rules and regulations that we have in place. This is vital, it's critical for the functioning of the financial system" and its integrity, she added.

While growth could ease to as low as 4.8 per cent this year, and the risk of a slowdown because of the global economy is bigger than the threat of inflation, Malaysia has a "high degree of resilience", Dr Zeti, 68, said in an interview in Lima, Peru, on Sunday.

Malaysian policymakers have struggled to boost confidence in the economy and its finances since oil prices started slumping late last year and as claims of financial irregularities at 1MDB hurt sentiment.

Tensions in the country have also increased as Prime Minister Najib Razak battled accusations of impropriety over political donations that ended up in his private accounts.

"People are distracted now" because the country rarely has political developments of this nature, Dr Zeti said. "Everyone wants these domestic issues to be resolved quickly, because as and when they are resolved, we expect the currency to recover even further" after gains in recent days, she said.

Meanwhile, 1MDB filed a police report yesterday against parties suspected to have leaked or sold confidential or proprietary information related to the firm.

"The Sarawak Report's blatant admission of having obtained confidential documents from Bank Negara Malaysia follows open admissions by an international publication Wall Street Journal that it too has reviewed documents relating to a 'government probe' on 1MDB and had access to transcripts of the Parliamentary Accounts Committee proceedings and the interim Auditor-General draft report on 1MDB," said 1MDB in a statement.

The government investment body added that despite these admissions, "no action has been taken against either those parties who have published said documents, nor against the parties that are leaking them in contravention of the law", saying this was the reason why it lodged the police report.

"It is our belief that such actions were taken with one or more malicious intents and may have breached Malaysian laws, including but not limited to, the Penal Code, the Official Secrets Act 1972, the Houses of Parliament (Privileges and Powers) Act 1952 and the Standing Orders of the Dewan Rakyat of Malaysia," it said.

BLOOMBERG, THE STAR/ASIA NEWS NETWORK

A version of this article appeared in the print edition of The Straits Times on October 13, 2015, with the headline 'Central bank 'had to protect financial system''. Print Edition | Subscribe