Press Statement
by Lim Guan Eng

(Petaling Jaya, Wednesday): DAP calls for immediate stern action to be taken not only against Bank Islam officers who were negligent, abused their powers and resposnsible for Bank Islam’s RM 700 million pre-tax losses but also Bank Negara for failing to detect such financial malpractices. Second Finance Minister Tan Sri Nor Mohamed Yakcop statement in Parliament yesterday that loans were given to people who were not supposed to received them is shocking as such criminal abuses of power should not happen in a bank that uses the holy name of Islam as its business core.

There is a general perception that corruption and malpractices would not happen in Bank Islam, which is run and staffed by devout personnel on strict religious principles. Action must therefore be taken without delay against those involved in both Bank Islam and Bank Negara so as not to affect and tarnish the name of Islam. DAP supports efforts to develop Islamic banking as a source of alternative finance with great earning and profit potential in Islamic countries, especially the Middle-East. For this matter the black sheep in both Bank Islam and Bank Negara must be severely punished as a deterrent and warning to other would-be perpetrators.

Clearly Bank Islam’s after-tax losses of RM 456 million for the financial year ending 30 June 2005 as compared to RM85.7 million profit last year shows not only a distinctive pattern of poor corporate performance and declining economic growth but also lack of internal control and proper regulation by Bank Negara. What is wrong with Bank Negara’s supervisory capacity when non-performing loans in Bank Islam can rise nearly 150% to RM 2.2 billion from RM 900 million last year. To suddenly record non-performing loans of RM2.2 billion as compared to RM 900 million in 2004 shows that not only Bank Islam but Bank Negara requires a revamp and shake-up.

Bank Islam has confirmed that much of the bad loans were given out to companies in Sarajevo and South Africa, but the main branch responsible for disbursing such loans was the Labuan off-shore branch. This does not give a good impression of the Labuan Off-shore Finance facility efforts to attract genuine investment and not involved in dubious financial transactions.

Public interests demands that those responsible for the losses and bad loans to jump to RM 2.2 billion must be identified, exposed and punished. Clearly too much money was lent to less credit-worthy borrowers, and the bank didn't chase for payment. But who authorised these loans? Who were these borrowers? Why did they default and what are the chances of Bank Islam getting its money back?

Bank Islam’s holding company, BIMB Holdings Ltd, is owned by Lembaga Tabung Haji, Permodalan Nasional Bhd, and the Employees Provident Fund, which collectively holds 61.2% of its shares. Since Bank Islam is publicly owned, Malaysians have a right to know what and who cause this losses and national scandal.

(26/10/2005)