Malaysia's Bank Islam vows probe as financial scandal looms
Malaysia's Bank Islam vows probe as financial scandal looms
Agence France-Presse, Kuala Lumpur
Malaysia's first-ever Islamic bank vowed on Friday to search out
and prosecute those responsible for 127 million dollars in losses
as the issue threatened to turn into a major financial scandal.
Bank Islam's managing director Noorazman Aziz said it was
working with the police, central bank and anti-corruption
authorities to get to the truth behind the massive net losses for
the financial year to June.
"Once investigations are completed, we will push for
prosecution," he said in a statement.
The bank, which was established in 1983, posted net profits of
85.74 million ringgit (US$22.7 million) last year but dived into
the red in the latest balance sheet which showed a 480.0 million
ringgit net loss.
BIMB Holdings, which controls Bank Islam Malaysia, said the
loss was mainly due to a provision of 774 million ringgit, mostly
to cover non-performing loans from its branch in Labuan,
Malaysia's offshore financial hub.
"Closer supervision and stricter accounting treatments
revealed that losses were much larger than what the head office
in Kuala Lumpur had expected," the bank said.
"Loans were given out generously without sufficient
understanding of the risks involved, including country and
project risks," it said.
Growing outrage over the losses led lawmakers this week to
call for heads to roll at Bank Islam, while Prime Minister
Abdullah Ahmad Badawi said the bank had to find the culprits
immediately.
"Bank Islam must act fast. If the negligence has elements of
crime, appropriate action must be taken without delay. We cannot
forgive this negligence," Abdullah was quoted saying in the New
Straits Times on Friday.
Malaysia's second finance minister, Nor Mohamad Yakcop, has
reportedly said the loans were given to "non-relevant parties"
and that action would be taken against those responsible.
Noorazman declined to reveal details of the investigation and
said poor administration was hampering the process.
"It is proving to be an arduous task for us because of poor
book-keeping practices which require us to actually painstakingly
reconstruct the credit files," he said.
"We also understand that some of the companies which took
these loans are no longer in existence," he added.
Malaysia, largely Muslim but with sizeable Chinese and Indian
minorities, is a leader in Islamic banking after introducing the
service in 1983 which provides products and services that comply
with Sharia or Muslim religious laws banning the earning of
interest.