JOHOR BARU – The loosening of Export-Import Bank of Malaysia Bhd’s (EXIM Bank) credit risk policy resulted in the awarding of loans with high default rates, said the 2019 Auditor-General’s Report Series II.
The Finance Ministry (MoF) owned-bank had recorded an accumulated loss of RM1.348 billion last year, with RM2.342 billion worth of loans unpaid.
The bank had also written off defaulted loans worth RM2.143 billion from 2001 to 2020, resulting in loss of assets and funds for the government-linked company (GLC).
According to Auditor-General Datuk Nik Azman Nik Abdul Majid’s report that was released today, these unpaid loans mainly comprised facilities given to foreign companies.
The audit analysis for years 2017 to 2020 found that 63 (53.4%) of 118 loan accounts were categorised as low risk, valued at RM6.899 billion, while the remaining 55 (46.6%) loan accounts were classified as high risk, valued at 3.278 billion.
“Audits until June 2020 revealed that 76 loan accounts are categorised as unpaid. Further analysis of 36 out of the 76 accounts shows that 19 loans were approved despite high credit risk ratings, while 17 obtained a good rating.
“This shows that, although a loan has good credit quality during approval, the risk of default still happens,” the audit report read.
Furthermore, although the report states that the funding recoupment rates in 2019 valued at RM7.571 exceeded targets, it does not provide an actual indication of the amount EXIM Bank is supposed to obtain.
This is due to the fact that the Credit Administration Department only records payment of loan accounts that are active.
Further loan accounts are administered manually, which results in repayment data not being able to be generated automatically.
“This situation occurred because EXIM Bank does not have a digital credit management system,” the report read.
Nik Azman said EXIM Bank’s management and board of directors must take proactive steps to combat the weaknesses pointed out in the report.
The recommendations state that EXIM Bank must revaluate strategies it uses to support its credit facilities, which would increase financial performance.
Additionally, EXIM Bank must also consider the implications of handing out loans to foreign companies that have already resulted in losses.
Further, the report stated that the financial institution should focus on awarding loans to local companies and increase efforts to recover defaulting loans. – The Vibes, September 28, 2021
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