Effective mechanism to instil integrity in the banking system.
DAP National Deputy Chairman and MP for Kepong Dr Tan Seng Giaw believes that besides extensive review of legislation for central banks such as Bank Negara, we need an effective mechanism to ensure integrity in the banking system.
Dr Tan notices the statement by Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz that central banks need supporting legal framework to address the dynamic changes in conditions in the current global financial system. She spoke at the fifth Banking and Financial Law School 2009 conference in Kuala Lumpur on 24.9.2009.
She pointed out that those in the advanced financial systems have resorted to unorthodox measures to prevent a systemic collapse of the global financial system.
She says,"While action has been based on the sense of urgency and to avoid a total collapse of the system, in the aftermath of the crisis, an extensive review of the legislation needs to be made."
Although Malaysia's export is affected by the global financial crisis, she does not have it as bad as others because of the existing banking system. Nevertheless, there were people who did not follow financial procedures such as the good concept of the Port Klang Free Zone (PKFZ), becoming a multibillion scandal as financial procedures were not strictly followed.
Over three decades ago, the RM2.5 billion Bank Bumiputera Finance (BMF) scandal resulted in a death and tightening of the the banking system. Then, the 1997 Asian economic crisis that started in Thailand also hit Malaysia badly with further streamlining of the system. Hence, we are not as badly affected by the current financial tsunami.
In July, 2009, Parliament passed the Central Bank of Malaysia Act 2009. Although Bank of Thailand assistant governor Krirk Vanikkul described Malaysia's new central banking legislation as "powerful and exclusive", the act may require further amendments to strengthen banking sector integrity.
The executive vice-president of the Federal Reserve Bank of New York Thomas C. Baxter feels that the main challenge for central bankers is to prevent another crisis as severe as the one just experienced. The closure of the Lehman Brothers in September 2008 in New York sparked off the financial crisis.
We must prevent another crisis by having better laws and enforcement. Further, we have to promote and strengthen integrity and ethics in all sectors including the Cabinet, the Prime Minister and his Ministers.
Dr Tan Seng Giaw