Zafrul explains how Genting HK secured RM2.5bn in unsecured loans

KUALA LUMPUR: The Ministry of Finance has stressed that the banks involved in the issuance of unsecured debt by Genting Hong Kong Ltd – and the Malaysian banking sector as a whole – are highly resilient in the face of various business operations challenges.

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz (Photo) said unsecured loans are commonplace in the banking industry and that Genting Hong Kong’s declaration of bankruptcy was deeply regrettable.

He pointed out that banks could approve unsecured loans based on the bank’s willingness to take internal risks, a credit assessment that meets criteria and approval based on the governance process. internal.

“Additionally, in the case of Genting Hong Kong – a company involved in the tourism and leisure sector – the loan was approved before the Covid-19 pandemic hit.

“When Covid-19 hit, many businesses that depend on tourism were affected, and that, of course, is something that cannot be expected when the loan was approved,” Tengku Zafrul said. in a post on his Facebook page on Saturday (January 29). ).

He said this after being recently asked by Port Dickson MP Datuk Seri Anwar Ibrahim to clarify the issue of three local banks named among Genting Hong Kong’s top unsecured creditors with a combined exposure of $600 million. Americans (RM 2.5 billion).

Tengku Zafrul also pointed out that not only local banks have provided unsecured loans to Genting Hong Kong, but also foreign banks.

He said banks should also comply with internal guidelines as well as guidelines from their respective central banks before granting loans.

“Does Datuk Seri want to give the impression that all these foreign banks also acted recklessly in lending to Genting Hong Kong?” He asked.

Tengku Zafrul also dismissed allegations of his involvement as finance minister as well as the involvement of bank stakeholders such as Khazanah Nasional Bhd, Employees Provident Fund and Permodalan Nasional Bhd in the loan approval process. .

He explained that the decision to lend was not determined by the Minister of Finance, the Ministry of Finance or the shareholders, but by the banks themselves through a process of due diligence and assessment of the by their respective credit committees to assess the ability of potential borrowers to repay their loans.

“I am convinced that as a former finance minister, Datuk Seri Anwar is also aware of the differences between the roles of board members and company management,” Tengku Zafrul said.

In the meantime, he said the banking sector had actually improved from the Asian financial crisis, where the non-performing loan rate in December 1998 had risen to 18.6% and the loss coverage rate on loans (LLC) was only 55.9%.

“This means that for every RM1 borrowed, only around 60 sen have been allocated to deal with the possibility of non-payment of loans,” he added.

He noted that since then the Malaysian banking system has been strengthened and is now more resilient.

“Today, the non-performing loan ratio is only 1.4%, including the provision for a partial non-performing loan ratio for Genting Hong Kong loans.

“LLCs remained strong at 131.5% compared to 55.9% in 1998. Thus, Malaysia’s financial system remained sound and there are no liquidity problems in the market,” Tengku Zafrul said.- Bernama

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