MAS Press Statement on Sime Bank Berhad
4 Mar 1998... Bank Negara Malaysia has informed the Monetary Authority of Singapore of the financial position of Sime Bank Berhad. Sime Bank Berhad operates a full licensed bank branch and a finance company in Singapore.
Bank Negara Malaysia has issued a statement reiterating its assurance that all deposits of Sime Bank Berhad and its subsidiaries in Malaysia and overseas, and interest due on these deposits, are guaranteed in full by the Government of Malaysia, and that this includes both non-bank and inter-bank deposits. A copy of its press statement is attached.
Bank Negara Malaysia has confirmed to MAS that this guarantee covers all deposits and interest at Sime Bank Singapore branch, and Sime Finance Ltd in Singapore, as well as all other Malaysian banks and finance companies operating in Singapore.
BANK NEGARA STATEMENT
In accordance with the move for greater disclosure on the banking sector, Bank Negara Malaysia wishes to provide latest developments concerning Sime Bank Berhad and the banking system.
Sime Bank recorded a pre-tax loss of RM1.57 billion for the 6-month period ended 31 December 1997. This loss arose from the need to make provisions totalling RM1.80 billion to cater in full for the bank's and its subsidiaries' bad and doubtful assets in respect of its Malaysian and regional operations as well as stockbroking activities. The loss had reduced the bank's net shareholders' funds to RM368 million and its capital base to RM698 million. This erosion of capital has reduced its risk weighted capital adequacy ratio (RWCR) to 2.9% as at 31 December 1997.
To meet the minimum RWCR ratio of 8% Sime Bank will need an additional minimum capital injection of RM1.2 billion.
Since the existing shareholders will be maintaining their current interests in Sime Bank, and in view of the current policy of encouraging mergers of banking institutions, Bank Negara Malaysia will facilitate merger negotiations with institutions with the necessary financial capacity. In the interim, the existing board of directors and management of Sime Bank will continue to be responsible for the operations of the bank.
Bank Negara Malaysia would like to stress that Sime Bank is not insolvent, it only needs to be recapitalised. Sime Bank has a positive net worth of RM368 million or an NTA of RM0.74 per share. This does not take into account the potential gain from the divestment of its investments in subsidiaries.
Bank Negara Malaysia reiterates its assurance to all depositors of Sime Bank and its subsidiaries in Malaysia and overseas that their deposits and interests are guaranteed in full by the Government of Malaysia. This include interbank deposits.
Bank Negara Malaysia provided information on the positions and performance of the banking industry on 17 February 1998. Now, we will like to provide information relating to the Malaysian banking institutions exposure to the region (outside Malaysia and Singapore). The total exposures of the Malaysian banking institutions including their operations in Labuan as at 31 December 1997 amounted to USD2.36 billion or about 2% of total loans of the banking system. We have directed the institutions to make appropriate provisions in respect of these exposures.
Bank Negara Malaysia has also made an assessment of the financial conditions of all financial institutions including that of their subsidiaries and its exposures to the region. The assessment was based on very stringent criteria and stress-tested under extreme conditions. The assessment revealed that only one other commercial bank and two small finance companies may require additional capital injection to meet RWCR requirements should those extreme conditions materialise. The commercial bank concerned is Bank Bumiputra Malaysia Berhad which may require capital injection of RM750 million. In this regard, the Government of Malaysia has undertaken to inject the necessary capital should the need arise. The two finance companies are Abrar Finance Bhd. and Cempaka Finance Bhd. which may require capital injections of RM7 million and RM25 million respectively. These two finance companies are already in advanced stage of merger negotiations.
We are confident that the banking system remain resilient in facing any challenges that may arise.
Any queries on the above should be directed at Bank Negara Malaysia at the following telephone numbers:- 2943910, 2943911, 2943917, 2943918, 2943910 or fax number 2948632.
Bank Negara Malaysia