Zafrul explains how Genting HK got RM2.5bil in unsecured loans

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

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz (pic) said unsecured loans are regular occurrences in the banking sector, and Genting Hong Kong’s bankruptcy declaration was deeply regrettable.

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

“Furthermore, 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 companies that depend on tourism were affected, and this is, of course, something that cannot be expected when the loan was approved,” said Tengku Zafrul in a post on his Facebook page on Saturday (Jan 29).

He said this after being asked by Port Dickson MP Datuk Seri Anwar Ibrahim recently to clarify the issue of three local banks named as among the chief unsecured creditors of Genting Hong Kong, with a combined exposure of US$600mil (RM2.5bil).

Tengku Zafrul also highlighted that the local banks were not the only ones that had provided unsecured loans to Genting Hong Kong, but also banks from abroad.

He said the banks would also have to comply with the internal guidelines as well as the guidelines of their respective central banks before granting loans.

“Does Datuk Seri want to give the impression that all those banks from abroad have also acted recklessly in providing loans to Genting Hong Kong?” he asked.

Tengku Zafrul also dismissed allegations of his involvement as the Finance Minister as well as the involvement of the banks’ stakeholders such as Khazanah Nasional Bhd, the Employees Provident Fund and Permodalan Nasional Bhd in the loan approval process.

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

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

Meanwhile, he said the banking sector had actually improved compared to during the Asian Financial Crisis where the non-performing loan ratio in December 1998 jumped to 18.6 per cent and the loan loss coverage (LLC) ratio was only at 55.9 per cent.

“That means for every RM1 borrowed, only almost 60 sen was allocated to address 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 per cent, including the provision for a partial non -performing loan ratio for loans by Genting Hong Kong.

“LLCs remained strong at 131.5 per cent compared to 55.9 per cent in 1998. So, the Malaysian financial system remained strong and there are no liquidity problems in the market,” said Tengku Zafrul.- Bernama