Malaysian's banks have been merge to 10 anchor bank after Asia Financial Crisis. The size of a merged bank are so huge that it is difficult for Central Bank or Bank Negara Malaysia to rescue a bank in the event that bank collapse or insolvent. Thus, Malaysia launch a Deposit Insurance System where in the event that a bank collapse. A depositor can claim his/her deposit from a insurance company up to RM60,000per account per bank. Central Bank or Bank Negara Malaysia no longer compensate a depositor in the event of a bank collapse.
Government claim that maximum amount of RM60,000 able to cover 95% of the depositor. It is true that my Bank account never exceed RM60,000 until now. Thus, I will be cover if my bank collapse. But majority of the employer I work for have more than RM1,000,000 in their personal bank account. Clearly, the Deposit Insurance system is disadvantage for wealthy people. They able to recover maximum RM60,000 only for RM1,000,000 they deposit (or more). The only thing they can do is to spread the money with more bank.
However, with the proposed take over of Southern Bank Bhd by Bumiputra Commerce Holdings Bhd. One bank will be eliminated if the merger proposal go through. Thus, public with more than RM60,000 would have less one bank to spread over their deposit. This merger is disadvantage to the public deposit especially the wealthier.
Further, which bank have the likely possibility of collapse? Southern Bank Berhad under the present CEO Tan Teong Hean at least has successfully go through two economic cycle or two recession. However, Bank Bumiputra, a bank form the merged Bumiputra-Commerce Bank have at least collapse twice. First, BMF scandal and second, 1997 Asia financial crisis. With such a bad record. Do you think I will deposit money in that bank?
Of course, people might said the new management of Bumiputa-Commerce is under previous management of Bank of Commerce, not previous management of Bank Bumiputra. But Bank of Commerce previously under Renong Group( now UEM World Bhd). Now, Bumiputra-Commerce Bank is a Government Link company. Like Bank Bumiputra previously.
Further, Bumiputra-Commerce Bank new chief, Nazir Razak is a Merchant Banker at CIMB Bhd. He do not have track record manage a Commercial Bank. Would you like to place your deposit with a bank manage by Tan Teong Hean, a banker with track record of survive two economic cycle or two recession? or place your money with a green horn in manage a commercial bank?
Ex-Finance Minister Tun Daim Zainnudin have a policy where he prohibit politician holding a director position in a bank. That is the reason why now appointment of senior management of financial institution required Bank Negara clearance or approval. This is to prevent politician used their position as a banker to buy vote or create influance by simply approving a loan to his supporter. This type of loan usually uncollectible and cause the collapse of a bank.
Nazir Razak, a brother of Deputy Prime Minister Najib Razak, is deem related to politician. How can Bank Negara give clearance or approval of a person related to a politician to manage a commercial bank Bumiputra-Commerce in the first place? He should remain in CIMB as merchant banker only. How Bank Negara able to prevent a brother of Deputy Prime Minister approval of certain loan it Bank Negara feel is not secure?
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