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clock 08-03-2019
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Bank Pembangunan Cleaning Up After Accused of Lax Lending

Finance Minister Lim Guan Eng has expressed confidence in newly appointed Bank Pembangunan Malaysia Bhd chairman Datuk Zaiton Mohd Hassan's ability to turn around the development bank which has been hit by accusations of lax lending practices and lack of corporate governance.

"We believe that Bank Pembangunan will soon get a clean bill of health," Guan Eng said. "We need a new person in charge [at the bank] and when you want to clean up a bank, I think the right person to do the job is sometimes a lady."

"We have every confidence in Datuk Zaiton's ability to turn around the bank," he said in his keynote address at the launch of the Industry Digitalisation Transformation Fund yesterday.

Speaking to reporters at the event, Zaiton, who took office on Feb 18, said Bank Pembangunan is in the midst of cleaning up its books and getting back on the right track.

The bank will start afresh "as soon as possible", she said, adding: "There are no guarantees, but the guarantee that we will give you is that we will try our very best."

The bank will be looking at its credit standards and credit processes, she said, stressing that it must balance its developmental role with the need to be prudent.

"We want to get very focused on what really is Bank Pembangunan's role in the country's economy and at the same time not to sacrifice prudence... And I believe we can strike that balance," she said.

Asked about the alleged lax lending practices at the bank previously with dubious loans given out, Zaiton said it will have to reassess everything in totality.

"The most important thing is moving forward, because what has been done, has been done. We now want to make sure that we are focusing on what is the business direction of the bank. With the right credit policies and right credit standards, we can achieve our designated role in the economy," she said.

Bank Pembangunan has been in the spotlight over loans given out to politically connected parties. This included extending financing to Integrated Nautical Resort Sdn Bhd and Garuda Suci Sdn Bhd — two companies linked to Indonesian businessman Tan Sri Peter Sondakh — which built and operate the St Regis Langkawi and Langkawi International Convention Centre.

The development bank has seen three changes in the chief executive officer's (CEO) position in recent months.

After Shaharuddin Zainuddin resigned as CEO last July, former chief financial officer Afidah Mohd Ghazali was made the acting president and CEO.

But Afidah stepped down on Feb 4, and Razali Hassan, the bank's chief operating officer since October 2018, was assigned as the covering president and CEO.

The bank has not explained the reasons for the changes, but Zaiton yesterday said: "We will clean up as soon as this year and we will have an incoming CEO. And we will finalise the strategy once the CEO, the board and the management sit together to formulate the plan going forward."

According to the bank's 2017 annual report, its board met 27 times; the Risk Management Committee, 29 times; the Credit Committee, 28 times; the Nomination and Remuneration Committee, 24 times; and the Audit and Examination Committee, 16 times; which work out to a total of 124 meetings a year.

To put things in perspective, Bank Pembangunan pays the chairman RM15,000 per month while directors are remunerated RM5,000 a month. The chairmen of the Credit Committee, Group Nomination and Remuneration Committee, Audit and Examination Committee and Risk Management Committee get RM5,000 per meeting while the members receive RM3,000.

In financial year 2017, Bank Pembangunan's gross impaired loans stood at 12.15%, which meant the bank wrote off 12.15 sen for every ringgit loaned out.

The Pakatan Harapan government has announced that it has no plans to reorganise or restructure development financial institutions, recognising their significance in supporting strategic industries.

Zaiton's appointment as Bank Pembangunan independent non-executive chairman on Feb 18 is for a two-year term. She succeeded Tan Sri Dr Wan Abdul Aziz Wan Abdullah, who retired in November last year.

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