Thursday, March 12, 2015

Why 1MDB Parked Its Money In Singapore?

Hantu Laut

Veteran Newsman Questions Rationale Of Parking 1MDB Funds In Singapore.

Again, I must qualify this is not a support for 1MDB (something is rotten in Denmark applies), but since they are keeping their inelegant silence, maybe, I can throw some lights on the controversy, why 1MDB keep parking the money outside the country. 

I don't believe in prolixity, so I'll make it short and breezy in layman's terms.

If you know the nitty-gritty of international banking and finance, it's not hard to understand why they keep parking the money outside Malaysia.

Why Singapore?

Singapore, being a financial centre allow non-residents to park their money in time-deposits in foreign currencies, where you can place your money in most major currencies and interest earned are not subject to Singapore tax (non-residents only)

Unlike Malaysia, many banks in Singapore have two departments, the DBU (Domestic Banking Unit) and ACU (Asian Currency Unit). 

Singapore is not short of banks that will gladly accept this kind of money as long as they are comfortable with where it came from.

Why 1MDB parked the money outside Malaysia?

If 1MDB remit the money back to Malaysia, they will have to convert it to local currency and they will no doubt collect more ringgit in exchange for the US$ funds, but should any of its foreign obligation matures anytime soon, they will have to incur massive foreign exchange losses, if they have to use ringgit to repay the foreign debts, so it makes sense to keep the money in the original currency, which, unfortunately, has to be placed in one of the financial centres as Malaysia do not have, or rather do not allow foreign currency deposit in the country.

The explanation given by PM Najib for keeping the money in Singapore because of BNM ruling requiring its approval for amount over RM50 million is wishy-washy, a terrible misguidance. Who would believe BNM can put a hurdle on a sovereign fund the brainchild of the PM? Why would BNM objected whatever the amount is for money coming into the country and allow billions to fly out of the country without a squeak?  

As a matter of fact if the US$1.1 billion had been remitted back to Malaysia, it would have strengthened the ringgit wee bit.

On the other hand, there is also strong possibility that the money is encumbered as collateral or part of collateral of other borrowings, thus the constraint of bringing it back home and the inelegant silence.

One can imagine one of two things of the opaqueness of 1MDB operations, either they are completely arrogant, or they are in such a big mess, they just don't know how to respond sensibly.


Anonymous said...

Sorry, brother Putrajaya. Two wrongs do a right make.

Anonymous said...

Sorry, brother Putrajaya. Two wrongs do a right make.

Anonymous said...

Sekarang Mereka Main Tibai Saja...

Who Cares! Semua Ketua Bahagian Setuju Apa!!

UluAtuk Sage said...

Can always changed the BNM regulation. After all it is not cast in stone. BNM is under Finance ministry jurisdiction and FM can make exception to in coming sovereign ( 1MDB ) fund into Malaysia and Several major local banks have foreign currencies account to cater for such need.

Anonymous said...

Dear Blogger,

if you have a foreign currency account (FCA) in any local banks (Maybank, CIMB, RHB, etc), you do not have to convert your transfer of foreign-denominated currency (especially US dollar) into Ringgit!!!!! For more information about this FCA thingy, you can refer to the following links. So now your argument would be 1MDB does not have FCA account?

Anonymous said...

I don't think you are correct, Malaysian residents & Companies can open USD Accounts with Malaysian banks and keep in USD currency and transact in the same currency. i speak from personal experience

Anonymous said...

"If 1MDB remit the money back to Malaysia, they will have to convert it to local currency and they will no doubt collect more ringgit in exchange for the US$ funds.."

Brother this is NOT true. All leading Msian banks offer USD deposit account facilities. If currency is the issue, it would be an easy matter for 1MDB to repatriate the funds back to Msia but maintain them in a USD account at Maybank for example. WHY they didn't and chose an obscure Swiss bank with a branch in Spore is the question.

Anonymous said...

Even in matters involving that peliwat tua terkutuk, singapore is always mentioned.

And over in singapore anything to do with that aged sodomite the official media people gets jittery.

Some red dot citizens also believed that semen had been injected into Saiful as part of a political conspiracy.

Mungkin ada udang disebalik batu kot??

Anonymous said...

They are not really arrogant, so they are truly in a big awkward MESS.

The elegant silence is becoming an irritating pandemonium.

gram.kong said...

To all smart asses,

Yes you can open FCA in local banks, but you have to convert your ringgit to buy the foreign currency to put in the FCA.

All foreign currencies remitted into Malaysia must be converted to ringgit first.Go check with Bank Negara.

Anonymous said...

Gram Kong, I am not a smart ass I am a banker. There are 3 logical options:

1.1MDB can repatriate its USD and keep it in USD with a domestic bank without converting to Ringgit
2. 1MDB can place its USD with a Msian bank in Spore or indeed with a Singaporean or other reputable international banks there.
3. 1MDB can place its USD with a Msian bank in Labuan where interest is tax-exempt.

BSI is NOT a reputable international bank you would expect a state-owned entity to use. It is a small private bank boutique type outfit

Perhaps this revelation in Singapore Business Times can shed light on the baffling choice.

13 Mar5:50 AM


SINGAPORE has unwittingly found itself drawn into the 1Malaysia Development Bhd (1MDB) saga after it was revealed that a local branch of Swiss private bank BSI is keeping the state-backed firm's money that was redeemed from a controversial investment in Cayman Islands funds.

However, this is not the only time that the same bank, BSI Singapore, deemed a boutique wealth manager, had dealt with 1MDB.

Based on documents obtained by The Business Times, BSI Singapore had issued portfolio statements on 1MDB's US$2.318 billion investment in Cayman Islands funds back in 2012 for client Brazen Sky - 1MDB's wholly-owned unit incorporated in the British Virgin Islands and the entity that carried out the investment offshore.

Typically, portfolio statements, which provide information on the value and performance of investments, are issued to clients by the investment manager, in this instance, it should have been Hong Kong-based Bridge Partners Asset Management as well as Australia's Avestra which entered the picture later.

When contacted to confirm or deny if the bank had issued these portfolio reports for 1MDB's investments, a BSI Singapore spokesman declined comment, citing confidentiality."