First Loss
Bank Islam in November 2005 for the first time in their history reported a loss of RM480 million (US$127,000,000), largely the result of high non-performing loans from its Labuan offshore unit. It closed its financial year with a total provision of RM774 million, and total non-performing loans of RM2.2 billion. The huge losses emerged when Bank Islam converted its Labuan office from a subsidiary to a branch in December 2004, and the affair has cast doubt on the effectiveness of Malaysia's regulatory and supervisory control of its banking system.
In a statement, Bank Islam explained that an internal investigation into the affair, led by the bank's management team under managing director, Dato' Noorazman A. Aziz, who was appointed in April 2005 to help clean up the bank's books, is already underway, but no formal outcome have been reported yet. Preliminary investigation has resulted that, the problem rose due to the bank's poor credit evaluation, and insufficient depth and breadth in processing loans with the bank's risk management frame was not properly established. Huge non-performing loans also being detected mainly from the lending activities that was directed at the housing, car financing, and corporate financing markets which without proper purposes.
Read more about this topic: Bank Islam Malaysia
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