A humongous RM23 billion bill

RM23 billion. That's what it cost to clear up the scandalous non-performing loans in the banks, which came to light following the 1997/98 Asian financial crisis.

The job of clearing up the mess was carried out by three government agencies, which had to deal with massive amounts of non-performing loans.

The government's share of the losses was RM12.5 billion while the cost to the banks was RM10 billion. Never mind the cost to the banks, it is the cost to the government (the Malaysian public) that we should be concerned about.

Much of the RM12.5 billion bailout bill that the government incurred came from two banks, namely Sime Bank and BBMB.

Hardly any media picked up this story except the The Edge business weekly in a revealing report.

As The Edge quite rightly asks:

And the sad part of the entire restructuring exercise is that the culprits responsible for the worst of the bad loans have not really been taken to task. At least, not yet.

In other countries, probably a few heads in both the public and private sectors would have rolled for causing the banking system to incur such huge losses. Here, heads have rolled in the private sector. Several corporate chieftains of well-connected companies were forced out. But it was not the end of their career, as some have resurfaced in other companies.

One banker, Datuk Ismail Zakaria, who was the chief executive officer of the now defunct Sime Bank, is facing criminal charges in court. Several other chief executives are also facing criminal charges. But considering that it has been more than seven years since the crisis, there are doubts anyone would eventually face the music.

Whether or not the authorities have taken action, the last of the agencies that was established to help sort out the mess in the banking system is finally closing shop.

Credit should go to The Edge for front-paging this story - but even The Edge failed to some obvious questions and to look at the broader supervision of the financial system. Instead, its feature focused on the rehabilitation exercise.

Some crucial questions that are begging for answers: Who were these borrowers who defaulted on the loans? Why are most of us in the dark as to their identities? Why are they not being prosecuted? Why was the collateral given so insufficient?

Here's another excerpt:

So, how did the loss of RM23 billion come about?

According to Datuk Zukri Samat, the managing director of Danaharta, the losses to the government in restructuring the banking system was about RM12.6 billion or less. This comprises RM11 billion that could not be recovered from the loans Sime Bank and BBMB were saddled with, RM1 billion for operating Danaharta (including its financing cost) and RM600 million from Danamodal (see table on banking restructuring cost to the government).

"The losses are probably less because the government did get some shares when they merged BBMB with Bank of Commerce. So, the cost at the end of the day is probably less than RM12.6 billion," he said in an interview last week.

But there are more unanswered questions: How did Bank Negara allow such colossal amounts to be lent out without ensuring the quality of the collateral was adequate? Was there any political involvement in allowing such bad loans to be given out to these dodgy borrowers? Why should the government (that's us, the public) foot the bill for bad loans in Sime Bank and BBMB?

We need these answers. But it looks like we will never know. Those responsible for these colossal losses are being allowed to get away scot free.

The BIG RM23 billion question is this: why are the other mainstream media not asking these questions and relentlessly pursuing those responsible for this debacle or, at least, highlighting this issue?

Perhaps it's not in their interests to do anything to undermine the cosy political-corporate nexus. By definition, as corporate media that derive much of their income from advertising, they would much rather keep the public in the dark than give them a revealing insight into the ugly underbelly of the corporate world.