Banks+politicians = ahlongs? Wonder if this will cause some banks to be in trouble.
A case of banks and bad loans
| June 12, 2012
A press conference later this week is expected to reveal how the Finance Minister had approved banks signing agreements with debt collectors to sell non-performing loans.
A few weeks ago when I was discussing the global financial crisis that happened many years back and the non-performing loans (NPL) resulting from it, a contact asked me a very pointed question.
He asked what if our financial institutions – foreign and local banks – knowingly, and with the collusion of Ministry of Finance (MoF) and those in government, had breached the 1989 Banking and Financian Act (Bafia)?
And what if these banks and the NPL, amounting to billions of ringgits, required the collusion of their lawyers as well?
And what if their criminality was resolved through a political solution which compromises the integrity of MOF and Bank Negara?
Banks in Malaysia have always had problems with NPL. Some banks worked within their own structure to recover the NPL but most banks used debt collection agencies to recover their debts.
Debt collection became a lucrative business and like all things Malaysian, “good business opportunities” have their attractions to the rich, the powerful and the politically connected.
Collusion between those in the banks, debt collection agencies and politicians fed each other. Thugs and gangsters become the enforcement arm necessary to ensure the collection of these debts and as they say, in every cloud there is a silver lining. In the misery of those who were in debts, these agencies thrived.
The banks used these arrangements legally and the debt collection agencies received their remunerations via commissions and fees agreed to between themselves and the banks.
But like in all things under this Barisan Nasional regime, these “arrangements” soon morphed into a situation where the banks “sold” these NPL to the debt collection agencies under sales and purchase agreements – something that Bafia does not allow these banks to do.
One prominent bank did just that. The bank appointed a prominent legal firm to prepare a sales and purchase agreement to sell that NPL to the debt collection agency.
To do this they have to go through a “vesting order” giving the rights of the NPL to the debt collection agency. This, under the Bafia, the bank cannot do.
If the prominent legal firm had knowingly abetted the bank, then the legal firm has done something illegal too.
Many other banks followed in the footsteps of the prominent bank and started selling NPL through the sales and purchase agreements to debt collection agencies, all acting in breach of the law.http://www.freemalaysiatoday.com/catego ... bad-loans/