KUALA LUMPUR (Reuters/AFP) - Malaysian Prime Minister Najib Razak, under investigation for a RM2.6 billion (S$902 million) donation deposited into his private bank account, on Friday announced a committee to set guidelines on political funding.

The National Consultative for Political Financing Committee will be led by two ministers and will ensure any money received for the purpose of politics is done so with "integrity".

Datuk Seri Najib lamented Malaysia's lack of adequate regulations on political donations and election spending.

"Now there aren't any regulations, so there's no benchmark as to what's right and what's wrong," he told reporters."With this we can show that we are practising the best practices."

"Therefore, there is an urgent need to regulate political funding to ensure accountability and transparency in the interest of healthy political practices," he said in a statement. He said his government would form a committee "with the aim to formulate a political funding plan of integrity".

He made no reference to the allegations against him.

Detractors immediately pounced on his annoucement.

Senior opposition figure Lim Kit Siang said Mr Najib was trying to "run away" from explaining the RM2.6 billion.

"Until he has answered this question, he has no moral authority to make any proposal," Mr Lim said.

"It is a magic show to divert public attention," said one posting on Mr Najib's Facebook page, one of hundreds to skewer the premier shortly after his comments.

Another said: "Set up whatever committee. If you are corrupt, you are corrupt. You will have to answer on judgement day."

Malaysia's election law only stipulates a maximum amount candidates can spend during a two-week political campaign. There are no laws requiring political parties to divulge the source of their funds.

Mr Najib has faced criticism from the public and within his party after a Wall Street Journal report in July said investigators looking into allegations of graft and financial mismanagement in debt-laden state fund 1Malaysia Development Berhad (1MDB) found that nearly US$671 million was deposited into Mr Najib's private bank account. Reuters has not verified the report.

Mr Najib has denied taking any money for personal gain, saying the allegations are part of a malicious campaign to force him from office. 1MDB has denied transferring funds to Najib and an interim government report found nothing suspicious.

The Malaysian Anti-Corruption Commission has said the money in Mr Najib's account was a donation, and not connected to 1MDB.

Political analysts warn that damage from the episode could spell future electoral disaster for the ruling coalition that has governed for 57 years.

It already is steadily losing ground among a new generation of voters seeking greater political freedoms and an end to corruption.

Political uncertainty stemming from 1MDB has contributed to a recent slide in the ringgit currency to 17-year lows, analysts say.

Two weeks ago, Mr Najib sacked his deputy premier who had called for transparency on 1MDB, his attorney general who was investigating it, and brought into his Cabinet key members of a parliamentary committee that also was pursuing a probe.