Don't exempt govt-linked entities from governance process in their fundraising: Banker

KUALA LUMPUR: Government and government-related entities should not be exempted from issuing a prospectus and disseminating proper information ahead of any securities issuance for fundraising activities, said Bank Muamalat Malaysia Bhd CEO Datuk Mohd Redza Shah Abdul Wahid.
The banking industry should take hold of its governance process to acquire as much information as possible and deliberate before granting any possible financing, said the head of the Islamic bank owned by DRB-Hicom Bhd and Khazanah Nasional Bhd.
"How do you then issue a bond when there is no transparency? This was the fundamental issue (besetting) 1Malaysia Development Bhd (1MDB) as information such as cash flows was not provided, yet (financial) institutions chose to issue the bond because it was government guaranteed.
"So it is probably time for us to rethink that sometimes – when you look at a particular issuance of securities – do you exempt an organisation just because it is government or government-related?" he said.
Mohd Redza was speaking to reporters on the sidelines of the General Council for Islamic Banks and Financial Institutions-World Bank Conference on Corporate Governance of Islamic Financial Institutions: Overcoming Challenges and Implementing Best Practices here today.
He added that it was proven that 1MDB should not have been exempted from producing information on its securities issuance, as a result of which the normal governance process did not go through.
"This is where I think the boards of various banks need to really rethink and look at this issue, as it is their right to reject such transactions if the information given is not sufficient," said Mohd Redza.
Earlier, in his opening remarks at the conference, Mohd Redza said governance structures are being strengthened and political appointees are being removed following the 14th general election in May.
He noted that 1MDB would be at the heart of many case studies in terms of what happened and what could be learnt from it. "I, myself, have read deeply on the subject and it is very clear that governance structures should not look at rank or position in its implementation."
Mohd Redza pointed out that tangibility and transparency lay at the core of Islamic finance; however, information and cash flows took a back seat in the 1MDB case as the fund was a government-related company and government guarantees were heavily relied on. – Bernama