Analysis and Refection of Malaysian Financial Crisis

Question: Discuss about the Analysis and Refection of Malaysian Financial Crisis. Answer: Introduction: I have done the analysis of the financial scandal of Bank Bumiputera which was one of the biggest financial scandal in history of Malaysia. It is the second largest bank in South East Asia and was involved heavily in lending to Hong Kong Chinese property and was also involved in extending credit to real estate business. Scandal was extended to Mahathir administration and all the important decisions are made with the consent of central bank and Finance ministry. I ascertained that Bad loans were issued in millions by Bank Bumiputera along with its offshore subsidiary to property speculators in Hong Kong. Near about US $ 1 billion costs the scandal and it also involved the murder of auditor of Bank Bumi (Malaysianbar.org 2017). Despite the weakening of property market, bank continued to extend credit and loan advances to real estate. Discussion: Role of Regulatory Bodies: Collapse of several companies and occurrence of financial scandal such as that happened in bank Bumiputera is due to the regulatory agencies ineffectiveness in legal enforcement, protecting minority shareholders and punishment to those involved in scandal. Activities of company are regulated by the regulatory regime. Capital market in Malaysia is governed by proper legislative and regulatory regime. Malaysian Securities commission has enforcement and investigative powers that has an important role to play in the event of any corporate fraud. Companies can be prosecuted for committing fraudulent acts (Gee 2016). Regulatory framework developed by the government of Malaysia has a role in prevention of such scandal as background checking and overseeing the offshore financial institutions. Any financial offense would be guarded by internal compliance program. Such framework requires the financial institutions to file any suspicious transaction report and that would be subjected to some la w enforcement agencies. Role of media as Societal Guardian: Media plays an important role in informing the public about goings in the financial institutions and this is especially in case when public in response demands some significant changes. They help in gathering information for over a long period as in the case of bank Bumi scandal. Some of the investigation done by media in this regard had led to radical cleaning up of the Group (Ahmad 2016). Some of the findings investigated by media have led to the exit of non-executive director of bank. Media supply the citizens with information that they must have for preventing the abuse of power of the financial institutions such as banks. Media has suggested and have shed some light on the complexity of prime minister in the scandal and this have been classified by the documents from Americas central intelligence agency. Report presented by media how the bank and its offshore subsidiary approved billion in bad loans to numerous (Rianti and Sari 2014). They informed about the total loss incurred by bank as hundreds of millions of dollars had disappeared into thin air. Role of Civil Society Groups for Check and Balance: Civil society when empowering the check and balances in the event of demanding of the state accountability. Accountability of the organization such as banks are highly affected the civil society. Accountable governance along with the vertical dimension is encouraged by civil society. They encourage acting by overall institute, weakens, and targets the entrenched opponents of accountability by raising public standards and expectation, exposing abuses of power and expectation of public for state performance. Horizontal accountability is influenced by civil society by empowering and encouraging creation of institutional check and balances (Vithiatharan and Gomez 2014). If there is no adequate check and balances, the minimum condition of legislative framework and regimes can remain incomplete and weak. Sanction or limitation of abusing of power by financial institution such as bank Bumi requires the public exposure. Exercising of power is bounded to some specific benchmark standards by w ay of promoting accountability (Rahman and Muhamad 2013). Bad Corporate Behavior and Societal Apathy: Billions of los that resulted from the financial scandal of Bank Bumi was due to fraudulent and irregular lending practice. Chairperson of Bumiputera Malaysia Finance had to face legal battle as he was accused of committing an act of blatant intimidation. He was accused of behaving illegally as funds was used in questionable way. Recommendation and Conclusion: From the above discussion, it can be concluded that financial scandal of the government owned Malaysian bank hampered its reputation as one of the biggest bank in South East Asia. I have made some of the recommendation that can be made to avoid occurrence of such massive financial scandal that are listed below: Auditing of public companies such as Bumiputera bank should be made a federal function. This would guarantee the independency of the accountability of the suspicious transactions. There should be annual examination of financial statement of company by external party. Accounting functions of organization should be segregated, as this would enable the management to prevent fraud by reducing fraud incentive. There should be proper authorization of transactions in order to ensure that staffs and members are not exceeding their authority. There should be an installation of anonymous reporting mechanism. There should be performance of background and check references that would involve credit licensing an employment of all new hires. Reference: Ahmad, K., 2016. Category Archives: History.Thinking. Gee, J., 2016. Malaysia's Prime Minister: Challenges Abroad, Consolidation at Home.The Washington Report on Middle East Affairs,35(6), p.54. Malaysianbar.org.my. (2017).The Malaysian Bar - Lorrain breaks his silence. [online] Available at: https://www.malaysianbar.org.my/news_features/lorrain_breaks_his_silence.html [Accessed 15 Apr. 2017]. Rahman, A.H.A. and Muhamad, S.F., 2013. Corporate governance and firms cash holding in Malaysia. Rianti, N.L.P.A.E. and Sari, M.M.R., 2014. Karakteristik Komite Audit dan Audit Delay.E-Jurnal Akuntansi,6(3), pp.498-508. Vithiatharan, V. and Gomez, E.T., 2014. Politics, economic crises and corporate governance reforms: regulatory capture in Malaysia.Journal of Contemporary Asia,44(4), pp.599-615.