Bank Negara Malaysia
Bank Negara Malaysia (BNM) is the
Malaysian central bank. Its headquarters is located in
Kuala Lumpur, the capital of
Malaysia and was established on
26 January 1959, to issue currency, act as banker and adviser to the Government and influence the country's credit situation.
Since its inception there have been seven governors.
In 1985, following the "Plaza meeting" of G-5 finance ministers in New York, the dollar fell sharply causing major losses in BNM's dollar reserves. According to Millman (p. 226), the bank responded by starting a program of aggressive speculative trading to make up these losses. Governor Jaffar referred to this strategy as "honest-to-God trading" in a December 1988 speech in New Delhi.
In the late 1980s, Bank Negara under Governor Jaffar Hussein, was a major player in the forex market. Its activities caught the attention of many; initially, Asian markets came to realize the influence Bank Negara had on the direction of forex market. Alan Greenspan acting the the Federal Reserve chairman later realized Bank Negara's massive speculation activities and requested the Malaysian central bank to curtail it.
On September 21, 1990, according to Millman (p.228), BNM sold between $500 million - $1 billion worth of pounds in a short period, driving the pound down 4 cents on the dollar. In response, bankers began
front running BNM's orders.
In 1992, BNM attempted to defend the value of the British pound against attempts by George Soros and others to devalue the pound sterling.
George Soros won and BNM reportedly suffered losses of more than USD $4 billion. [
1]
In 1993, BNM lost $2.2 billion in speculative trading, according to Millman (p.229)
In 1994, BNM became technically insolvent and was bailed out by the Malaysian Finance Ministry (Millman, p. 229)
In 1998, BNM pegged 3.80
ringgit to a
US dollar after the ringgit substantially depreciated during the
Asian financial crisis.
In 2005, the central bank abandoned
fixed exchange rate regime in favor of managed
floating exchange rate system an hour after floated its own currency, resulting in
capital flight of more than USD 10 billion. BNM continues to run negative interest rate differential to USD. The ringgit continues to trade within 1% of abandoned fixed rate.
Gregory J. Millman, Around the World on a Trillion Dollars a Day, Bantam Press, London and New York, 1995.
*
Malaysian ringgit*
Bank Negara Malaysia
