Malaysia Names New Central Bank Governor

Haireez Azeem
2016.04.27
Kuala Lumpur
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160427-MY-bank-governor-620.jpg Bank Negara Malaysia Governor Zeti Akhtar Aziz releases the bank’s annual report for 2015 in Kuala Lumpur, March 23, 2016.
AFP

Malaysia’s government on Wednesday appointed the deputy governor of the central bank to replace outgoing Gov. Zeti Akhtar Aziz, ending months of speculation in the nation’s financial industry.

Bank Negara Malaysia Deputy Gov. Muhammad Ibrahim is to replace Gov. Zeti Akhtar Aziz, who will retire at the end of April, ending her 16-year tenure as the first woman to head Malaysia’s central bank.

Wednesday’s announcement halted a four-day slide by the Malaysian ringgit against foreign currencies, the longest stretch of losses since November. Meanwhile, stocks had plunged to a six-week low.

Ibrahim’s appointment as the new central bank chief came a day after the nation’s image in capital markets took a blow, when Malaysia’s debt-ridden state investment fund 1Malaysia Development Bhd. (1MDB) announced it had defaulted on a U.S. $ 1.75 billion bond that it had issued.

Zeti investigated for role in 1MDB probe

The fund has also been plagued with allegations of financial mismanagement and corruption that have overshadowed Prime Minister Najib Razak and led to calls for his resignation.

Zeti took part last year in a special task force that was investigating these allegations.

But on July 13, 2015, Police Inspector-General Khalid Abu Bakar said his agency would investigate all members of the task force, including Bank Negara personnel, to identify the source of a leak of “classified documents to foreign nationals” pertaining to 1MDB.

Khalid served on the task force along with Zeti, then-Attorney General Abdul Gani Patail and Malaysian Anti-Corruption Commission Chief Commissioner Abu Kassim Mohamed.

Najib sacked Gani two weeks after the investigation was announced, and replaced him with Mohamed Apandi Ali. In January, Apandi cleared Najib of potential corruption charges linked to U.S. $681 million in money linked to 1MDB that was deposited into the prime minister’s private bank accounts.

Najib, who also serves as finance minister, issued a statement on Wednesday thanking Zeti for her contributions to the nation’s financial system while praising Muhammad, who will take over on May 1.

“I am confident that under Muhammad’s leadership, Bank Negara Malaysia can continue its service in helping the government, providing advice and views for catalyzing the country’s economic growth, as well as administer monetary policy and oversee the country’s financial industry, including continuing Bank Negara Malaysia’s efforts to grow the financial industry,” Najib said.

Zeti praises Muhammad

Zeti was appointed as the central bank’s acting governor for a week in September 1998 during the height of the Asian financial crisis that erupted in 1997.

She then served as the bank’s deputy governor for two years before taking over as governor in May 2000. In 2009, Global Finance magazine rated Zeti, now 68, as the World’s Best Central Bank Chief.

The retiring governor called Muhammad’s appointment positive for the country.

“Being part of our policy team at the bank will provide continuity and the much needed certainty in this prevailing period of great uncertainty. I have great confidence in his ability to lead the bank going forward into the future,” Zeti said in the statement.

As speculation about her future grew last year, Zeti told reporters at a press conference that “16 years is too long.”

More recently, she spoke about her potential successor.

“There is plenty more to do – the financial system needs to leverage on technology, including electronic payments. There are so many more things to be done for the central bank as a catalyst,” she told reporters.

Muhammad, who joined the central bank in 1984 and holds a master’s from Harvard University, was appointed deputy governor in 2010. He was seen a favorite to replace Zeti.

Accepting Najib’s appointment, Muhammad stressed humility, calling it a way to serve the country.

“I will strive to carry out the duties of governor of Bank Negara Malaysia to the best of my ability. I wish to record my appreciation to the prime minister and the government for the confidence and trust placed upon me,” he said in the statement.

He said the bank must maintain financial stability by remaining focused on its strategic agenda.

Izzuddin Yussof, a research economist at the Malaysian Industrial Development Finance Bhd. (MIDF), described Muhammad as a positive pick because of his experience working at the central bank under Zeti.

“With this appointment, we are expecting that the monetary policy path during Zeti’s era would continue and negative sentiments on Malaysia’s economy would improve,” he told BenarNews.

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