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Malaysia's Bank Islam vows probe as financial scandal looms
10/29/2005
KUALA LUMPUR, Oct 28 (AFP): Malaysia's first-ever Islamic bank vowed 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 (22.7 million dollars) 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 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.
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