The foreign exchange losses incurred by Malaysia's central bank stemmed from aggressive positions taken by its currency traders between 1987 and 1992, purportedly to stabilise the ringgit.
According to media reports, the bank's downfall can be traced to 1992, after the traders bet that the British pound would appreciate, taking a position opposite to that of renowned investor and philanthropist George Soros. His correct prediction reputedly earned him US$1 billion in a day, while Bank Negara declared forex losses of RM9.3 billion in 1992 and another RM5.7 billion in 1993.
Some heads rolled when the scandal erupted in 1993. The late central bank governor Jaffar Hussein and Tan Sri Nor Mohamed Yakcop, who headed the bank's foreign exchange operations, resigned in 1994.
But no further investigation ensued despite claims by opposition stalwart Lim Kit Siang in 1993 that the losses were closer to RM30 billion. He had asked for a royal commission of inquiry to be set up then, but to no avail. Until now.
Tun Dr Mahathir Mohamad was prime minister at the time, and his minister of finance from 1984 to 1991 was Tun Daim Zainuddin. Tun Daim was succeeded by jailed opposition leader Anwar Ibrahim, who served from 1991 to 1998, before he was sacked by Dr Mahathir. Anwar has said that he was kept in the dark on the currency trades until things spiralled out of control.
The scandal resurfaced in January this year when former Bank Negara assistant governor Abdul Murad Khalid alleged in an interview with the New Straits Times that the losses were closer to US$10 billion, or RM30 billion.
While the decades-old scandal merits investigation, political observers say the inquiry is clearly intended as a counterattack by Prime Minister Najib Razak against allegations - by Dr Mahathir and the opposition generally - that he is linked to billions of ringgit lost from embattled state fund 1Malaysia Development Berhad.
The inquiry also puts the veteran politicians of new opposition pact Pakatan Harapan - comprising parties led by former foes Dr Mahathir, Mr Lim and Anwar - in the awkward position of testifying against their new friends.
