Forex/BNM losses (early 1990s)
In the early 1990s Malaysia's central bank lost billions of ringgit trading foreign currencies, and a Royal Commission of Inquiry set up 23 years later produced a much larger loss figure than the one disclosed at the time — a gap that is still argued over.
What happened
In the late 1980s and early 1990s Bank Negara Malaysia, the country's central bank, became an unusually large participant in international currency markets. Its stated objectives had been broadened to include profit optimisation and market expertise alongside the traditional job of managing reserves, and later reporting described trading volumes well above what central banks normally run.
- 1992the bank's accounts showed its Other Reserves falling from RM10.1 billion to RM743 million
- 1993the bank's accounts recorded RM5.7 billion as deferred expenditure from foreign-exchange dealings
That RM5.7 billion figure was audited and tabled in Parliament by the Finance Minister of the day, Anwar Ibrahim.
The immediate fallout came in 1994. Governor Jaffar Hussein, who had run the bank since 1985, resigned; Nor Mohamed Yakcop, the officer in charge of the dealing operations, also left.
Ahmad Don took over as governor in May 1994 and told the later inquiry that he wrote to Deputy Prime Minister Anwar Ibrahim setting out that there would be no purely speculative trading and that reserves would be managed on an investment basis. Former governor Zeti Akhtar Aziz testified that from 1994 onwards realised profits and losses were reflected in the bank's profit and loss account.
Nor Mohamed Yakcop returned to government later, as special economic adviser to Prime Minister Mahathir Mohamad from 2000 and as Minister of Finance II from 2004 to 2009.
The episode returned to national politics in 2017. After former assistant governor Abdul Murad Khalid claimed in January that the losses were far larger than disclosed, the Cabinet formed a task force in February.
The RCI took effect on 15 July, chaired by Mohd Sidek Hassan. It held nine days of hearings across August and September, heard 25 witnesses, submitted its report to the Yang di-Pertuan Agong on 13 October 2017, and had it tabled in Parliament on 30 November.
The report set out these losses:
- 1992RM12.35 billion
- 1993RM15.29 billion
- 1994RM3.86 billion
It said the losses had a significant negative effect on the economy and impaired the central bank's ability to do its job.
The RCI recommended that police investigate whether the facts disclosed possible criminal breach of trust, and its report attributed principal liability to Nor Mohamed Yakcop and shared liability to several other former officials. An RCI enquires and reports; its findings and recommendations are not criminal convictions or court judgments.
The numbers themselves are the central dispute, and they should be read side by side rather than merged.
- The audited contemporaneous figure
- RM5.7 billion
- The 1992 accounts
- implied a roughly RM9.3 billion fall in reserves
- Lim Kit Siang
- alleged around RM30 billion in Parliament in 1993
- Abdul Murad Khalid
- alleged about US$10 billion
- The Commission
- gave RM31.5 billion for 1992-1994
- Zeti Akhtar Aziz
- testified to RM32.07 billion across 1988-1994, a period that included a profit year
Why the losses happened is disputed too. Nor Mohamed Yakcop told the Commission he had hedged 100% instead of 60% or less, while witness evidence in the report traced a shift towards trading for profit to Jaffar Hussein's tenure. Whether Bank Negara lost money on the wrong side of the September 1992 sterling crisis is reported but never officially confirmed.
No criminal charge followed the RCI’s recommendations. Mahathir Mohamad denied knowledge of the leveraged dealings and blamed the two central bank officials; the Commission considered his account questionable and recommended investigation.
Anwar Ibrahim has denied withholding the full extent of the losses from Cabinet and has said he was bound by the audited 1993 accounts.
Opposition politicians at the time argued the inquiry was aimed at Mahathir, who by 2017 was leading opposition efforts against the government, and Mahathir pointed out that the Cabinet he led had decided against an inquiry in 1993. He also failed in an attempt to have the chairman removed for alleged bias.
After the 2018 change of government, de facto law minister Liew Vui Keong said on 1 July 2019 that the police report had been classified as no further action, citing missing documents from more than 25 years earlier and the complainant's retraction.
What the sources say
What happened
Bank Negara Malaysia (BNM), the central bank, took large positions in international currency markets in the late 1980s and early 1990s; officials described the activity as smoothing volatility, while the central bank's own stated objectives had been broadened to include "profit optimisation and market expertise".
Big Money: Recollecting Bank Negara's massive forex lossesSpecial Report: Findings of RCI into Bank Negara's forex losses
The scale of BNM's trading was unusual for a central bank; by the early 1990s it was described in later reporting as trading volumes several times the norm for central banks.
What was the BNM forex scandal?Big Money: Recollecting Bank Negara's massive forex losses
BNM's 1992 accounts showed "Other Reserves" falling from RM10.1 billion in 1991 to RM743 million in 1992, a drop of about RM9.3 billion, alongside a contingent liability of about RM2.7 billion.
Big Money: Recollecting Bank Negara's massive forex lossesSpecial Report: Findings of RCI into Bank Negara's forex losses
BNM's 1993 annual report recorded RM5.7 billion as deferred expenditure arising from foreign exchange dealings; that figure was the one audited by the then Auditor-General and tabled in Parliament by the Finance Minister of the day, Anwar Ibrahim.
Special Report: Findings of RCI into Bank Negara's forex lossesForex losses: Soros vilified
Tan Sri Jaffar Hussein was Governor of Bank Negara from 1985 until 1994 and resigned on 1 April 1994 after the losses became public.
Nor Mohamed Yakcop, the BNM officer who ran the foreign exchange dealing operations, also left the central bank in 1994; his official biography records employment at BNM from 1968 to 1994.
Tan Sri Nor Mohamed Yakcop biographySpecial Report: Findings of RCI into Bank Negara's forex losses
Ahmad Don became Governor in May 1994 and testified in 2017 that shortly after taking office he wrote to then Deputy Prime Minister Anwar Ibrahim stating there would be no purely speculative trading and that operations would be conducted on an investment basis to preserve reserves.
Speculative trading ended after 1990s forex losses: Former BNM governorSpecial Report: Findings of RCI into Bank Negara's forex losses
Former Governor Zeti Akhtar Aziz testified to the 2017 inquiry that since 1994 all realised profits and losses have been reflected in Bank Negara's profit and loss account.
Forex losses amounted to RM32b from 1988-1994Speculative trading ended after 1990s forex losses: Former BNM governor
Nor Mohamed Yakcop later returned to public office: Special Economic Adviser to Prime Minister Mahathir Mohamad from May 2000 to end-2003, and Minister of Finance II from April 2004 to April 2009.
Tan Sri Nor Mohamed Yakcop biographyForex losses: Soros vilified
The 2017 Royal Commission of Inquiry
In January 2017 former BNM assistant governor Abdul Murad Khalid publicly claimed the losses were far larger than had been disclosed; the Cabinet formed a special task force in February. The Yang di-Pertuan Agong assented to the Royal Commission of Inquiry, effective 15 July 2017.
Newsmakers 2017: Forex loss RCI: Ghosts from a scandal pastEnforcement Agency Integrity Commission
The Commission was chaired by Tan Sri Mohd Sidek Hassan, held nine days of public hearings in August and September 2017, heard 25 witnesses and received 42 documents.
Special Report: Findings of RCI into Bank Negara's forex lossesNewsmakers 2017: Forex loss RCI: Ghosts from a scandal past
The Commission submitted its report to the Yang di-Pertuan Agong on 13 October 2017 and the report was tabled in Parliament on 30 November 2017.
Special Report: Findings of RCI into Bank Negara's forex lossesForex RCI: Bank Negara losses affected Malaysia's economy
The Commission's report set out annual loss figures of RM12.35 billion for 1992, RM15.29 billion for 1993 and RM3.86 billion for 1994.
Forex RCI: Bank Negara losses affected Malaysia's economySpecial Report: Findings of RCI into Bank Negara's forex losses
The Commission stated the losses had a significant negative effect on the national economy and impaired Bank Negara's ability to fulfil its mandated role.
Forex RCI: Bank Negara losses affected Malaysia's economySpecial Report: Findings of RCI into Bank Negara's forex losses
The Commission recommended that police investigate whether the facts disclosed a possible criminal breach of trust under Sections 406 and 409 of the Penal Code.
Forex RCI blames Nor YakcopRCI finds Nor Mohamed Yakcop responsible for bank's forex losses
The Commission’s report described Nor Mohamed Yakcop as principally liable and identified Governor Jaffar Hussein, Deputy Governor Lin See Yan, the BNM board, then Finance Minister Anwar Ibrahim and then Prime Minister Mahathir Mohamad as sharing liability; these were the Commission’s findings and recommendations, not court determinations.
A police report based on the Commission's findings was lodged on 30 November 2017 by the Commission's secretary, Yusof Ismail.
On 1 July 2019, after the change of federal government, de facto law minister Liew Vui Keong said the police report had been classified as "no further action", citing a lack of documentary evidence for events more than 25 years old and the complainant's retraction of the report. No one has been charged over the losses.
Police report retractedDr M's lawyer says RCI report on forex losses flawed
Where accounts differ
No verified public accounting has been located that identifies recovered amounts or provides a complete reconciliation of the deferred expenditure’s final write-off treatment.
searched: Royal Commission of Inquiry, Bank Negara Malaysia, Parliament and contemporaneous accounting records
The total size of the losses is disputed and the competing figures come from different sources and dates. The 1993 BNM annual report recorded RM5.7 billion as deferred expenditure. Reporting on the 1992 accounts identified a roughly RM9.3 billion fall in Other Reserves. DAP leader Lim Kit Siang alleged in Parliament in 1993 that losses were around RM30 billion. Former assistant governor Abdul Murad Khalid alleged the losses were about US$10 billion, roughly RM25 billion at the exchange rates of the time. The 2017 Commission's report gave RM31.5 billion for 1992-1994, and former governor Zeti Akhtar Aziz testified to a figure of RM32.07 billion for 1988-1994 that included RM2.47 billion of profit in 1990.
Big Money: Recollecting Bank Negara's massive forex lossesWhat was the BNM forex scandal?Forex losses amounted to RM32b from 1988-1994Forex RCI: Bank Negara losses affected Malaysia's economy
Whether the trading was hedging that went wrong or deliberate speculation for profit is disputed. Nor Mohamed Yakcop told the Commission he had made a mistake by hedging 100% against currencies rather than 60% or less. Witnesses cited in the Commission's report attributed a shift towards trading for profit to Governor Jaffar Hussein's tenure.
Special Report: Findings of RCI into Bank Negara's forex lossesRCI finds Nor Mohamed Yakcop responsible for bank's forex losses
Whether BNM lost money betting against the Bank of England during the September 1992 sterling crisis is not settled. The Edge reported that BNM was widely understood to have been on the losing side of that episode, while noting the central bank never officially confirmed it.
How much the political leadership knew is disputed. The Commission took the view that Mahathir Mohamad's account of knowing only about RM5 billion in losses was questionable and that his involvement warranted investigation; Mahathir denied knowledge of the leveraged dealings and attributed the losses to Jaffar Hussein and Nor Mohamed Yakcop.
Newsmakers 2017: Forex loss RCI: Ghosts from a scandal pastMahathir
Anwar Ibrahim's position is disputed. The Commission heard evidence that he knew of losses beyond the audited figure; Anwar has denied failing to inform the Cabinet of the full extent of the losses, and has said he was bound by the audited 1993 accounts.
Anwar denies failing to inform Cabinet of BNM's entire lossesAnwar kept forex losses a secret to avoid losing job as finance minister
The motive for holding the inquiry in 2017 is disputed. Opposition politicians then aligned with Pakatan Harapan characterised the Commission as a political move against Mahathir Mohamad, who by then led opposition efforts against the Barisan Nasional government; Mahathir noted that the Cabinet he led, which included the later Prime Minister Najib Razak, had decided against an inquiry in 1993. The government of the day presented it as an accountability exercise.
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The Commission's own findings are contested. Mahathir Mohamad unsuccessfully applied to have chairman Mohd Sidek Hassan removed for alleged bias, and his lawyer later described the report as flawed and said no action was needed because documents supplied by his client had been omitted.
Dr M's lawyer says RCI report on forex losses flawedDr Mahathir's lawyer slams 'legally questionable' forex RCI findings
Whether Jaffar Hussein bore primary responsibility or took the blame for decisions made elsewhere is disputed. The Commission's report records witness evidence that he played down or concealed the losses from the government; other figures, including then Deputy Home Minister Nur Jazlan Mohamed in 2017, have said he took the fall for others.
Special Report: Findings of RCI into Bank Negara's forex lossesEx-BNM chief took the fall for others
The claim, reported from the Commission's proceedings, that the losses depleted about two-thirds of Bank Negara's reserves has not been independently verified against the central bank's published accounts for those years.
RCI finds Nor Mohamed Yakcop responsible for bank's forex lossesNewsmakers 2017: Forex loss RCI: Ghosts from a scandal past
Common questions
What were the Bank Negara forex losses about?
Bank Negara Malaysia took large positions in international currency markets in the late 1980s and early 1990s, when its objectives included profit optimisation and market expertise alongside reserve management. Its trading volumes were later described as unusually large for a central bank. The bank’s 1992 accounts showed Other Reserves falling from RM10.1 billion to RM743 million, while its 1993 annual report recorded RM5.7 billion in deferred expenditure from foreign-exchange dealings.
Big Money: Recollecting Bank Negara's massive forex lossesSpecial Report: Findings of RCI into Bank Negara's forex losses
How much did Bank Negara actually lose?
There is no single figure in the record because the reported totals cover different periods and measures. The audited 1993 accounts recorded RM5.7 billion as deferred expenditure, while the 2017 Royal Commission of Inquiry gave RM31.5 billion for 1992 to 1994. Former governor Zeti Akhtar Aziz testified to RM32.07 billion for 1988 to 1994, including RM2.47 billion profit in 1990; Lim Kit Siang and former assistant governor Abdul Murad Khalid gave other figures.
Big Money: Recollecting Bank Negara's massive forex lossesForex losses amounted to RM32b from 1988-1994Forex RCI: Bank Negara losses affected Malaysia's economy
Was Bank Negara hedging or speculating for profit?
The record contains both accounts. Nor Mohamed Yakcop told the Royal Commission that he made a mistake by hedging 100% against currencies rather than 60% or less. Witnesses cited in the Commission’s report attributed a shift towards trading for profit to Governor Jaffar Hussein’s tenure, while officials had described the activity as smoothing market volatility.
Special Report: Findings of RCI into Bank Negara's forex lossesRCI finds Nor Mohamed Yakcop responsible for bank's forex losses
What changed after the losses became public?
Jaffar Hussein resigned as Bank Negara governor on 1 April 1994, and Nor Mohamed Yakcop also left the central bank that year. Ahmad Don became governor in May 1994 and later testified that he told Anwar Ibrahim there would be no purely speculative trading, with operations conducted on an investment basis to preserve reserves. Zeti Akhtar Aziz testified that, from 1994, realised profits and losses were reflected in Bank Negara’s profit and loss account.
Los Angeles TimesSpeculative trading ended after 1990s forex losses: Former BNM governor
What did the 2017 forex RCI say?
The 2017 Royal Commission of Inquiry reported losses of RM12.35 billion for 1992, RM15.29 billion for 1993 and RM3.86 billion for 1994. It said the losses had significantly affected the national economy and Bank Negara’s ability to fulfil its role, and recommended a police investigation into whether the facts showed a possible criminal breach of trust. The Commission’s report also assigned principal liability to Nor Mohamed Yakcop and shared liability to several other former officials; those were Commission findings and recommendations, not court judgments.
Forex RCI: Bank Negara losses affected Malaysia's economyForex RCI blames Nor Yakcop
Did anyone get charged over the forex losses?
No. A police report based on the Royal Commission’s findings was lodged on 30 November 2017, but on 1 July 2019 de facto law minister Liew Vui Keong said it had been classified as “no further action”. He cited a lack of documentary evidence for events more than 25 years old and the complainant’s retraction of the report. No one has been charged over the losses.