SOME of the nations premier banks had illegally sold their non-performing loans (NPLs) to debt collecting agencies.
If that is not enough, these NPLs were sold to agencies whose majority shareholders are foreigners.
This means proceeds from the sale of auctioned property from NPLs as well as whatever that is collected from the defaulters are going overseas.
According to sources in the financial sector, this practice, which has been going on since 2005, has seen close to RM60 billion leaving the country.
"What you have is government agencies colluding with some of these banks to allow NPLs to be sold to these debt collection agencies, which are clearly in breach of the Banking and Finance Act (Bafia) 1989," said a source.
Under Bafia, for NPLs to be "sold", three mandatory requirements must be fulfilled:
* Obtaining a valid sanction from the finance ministry (MOF) prior to the sale and purchase of these NPLs.
However, the application for a vesting order should be by both the banks and the transferee.
In these cases, however, the vesting order is given to a debt collection agency;
* NPLs can only be sold and all rights of the banks can only be vested in a Bank Negara-regulated financial institution.
These third parties are clearly not financial institutions; and
* The banks can only sell these NPLs to financial institutions, which must have least 51 per cent local equity.
In short, the majority share must be held by Malaysians.
Documents made available to The Malay Mail, however, indicated the NPLs were sold to foreign-controlled debt collecting agencies, via sale and purchase agreements, put together by reputable local legal firms.
Another twist to the tale is that a search on some of these companies reveals they are all foreign-majority owned where among the shareholders are the respective banks themselves as well as their overseas-based competitors.
A foreigner, who is the son in-law of a prominent local banker, owns the majority of shares in one such debt collection agency, which had procured a vesting order from a premier locally based foreign bank.
The document accompanying this report (above) illustrates the United States based JP Morgan Chase is the “beneficiary bank” of these NPLs sold by this premier bank, via a Luxembourg account.
“There are many issues here to be considered,” said one source, who is suing his bank for foreclosing and auctioning off his property. Chief among them is the legality of the seizure and auctioning off the property of Malaysians.”
The source’s lawyer said another issue was corporate tax evasion.
“So much money is being sent overseas … money of hard-working Malaysians who have fallen on hard times.
“Instead of helping them out, these banks, aided by Bank Negara’s indifference, are squeezing Malaysians, and the beneficiaries are Western companies and individuals.”
In 2007, the MOF proceeded with a proposal to amend Section 49(9)(a) of the Bafia to allow debt collection agencies to purchase NPLs.
However, the proposed amendment was never laid before Parliament, which means the conducts of banks that sell these NPLs are illegal.
Documents viewed by The Malay Mail indicate a “blanket approval” was given in 2007, as indicated via an MOF letter on Sept 7, 2009.
“However, the so-called ‘blanket approval’ has yet to be produced even after repeated requests,” said one lawyer representing another client, who had his house repossessed.
“Even then, Bafia nor the Delegation of Powers Act 1956 allow for such a ‘Blanket Approval’ to be given, as the Bafia clearly spells out the procedure to procure such approval, and that such sanction and approval is given on a case-to-case basis.”
Bank Negara and the MOF have yet to respond to queries from The Malay Mail.