KUALA LUMPUR: Bank Negara Malaysia has refuted The Malay Mail front page report on Monday titled 'RM60b illegal outflow', which alleged that local banks have been breaching BAFIA laws since 2005 by selling non--performing loans (NPL) to foreign--controlled debt collection agencies.
In a press statement, yesterday, the central bank said banking institutions could dispose of their NPLs as part of their risk management practices as long as the sales were made in accordance with the law.
The statement said: "We refer to a recent news report on the sale of nonperforming loans to foreign parties by banking institutions that is inaccurate and misleading.
Banking institutions can dispose of their NPLs as part of the bank's risk management practice. Disposal of NPLs provides the flexibility for banks to manage their loan portfolios effectively and efficiently to maximise recovery to protect depositors' interest.
Any recovery action must be in accordance with the law.
Banking institutions are permitted to sell their NPLs to non--banking institutions provided that the sale of NPLs is made in accordance with the requirements of the Guidelines on the Disposal/Purchase of Non--Performing Loans by Banking Institutions, which are issued under the Banking and Financial Institutions Act 1989.
The guidelines spell out certain requirements that must be met by any banking institution proposing to sell NPLs:
>> Banks can only sell to locally incorporated companies which the purchaser is majority owned by domestic shareholders as the purchaser is subject to a foreign equity cap of 49%
>> Banks are also required to undertake necessary measures to inform the borrower of the sale of the NPLs
>> Sale of NPLs that is made in accordance with requirements of the Guidelines do not contravene the BAFIA
>> Sale of NPL does not affect any debt restructuring agreements.
The amount of NPLs sold in the news report is grossly overstated. Since 2005, NPLs sold by banks are less than RM3.0 billion."