BANK NEGARA MALAYSIA

Laurent L Jacque

Chapter 4 in Global Derivative Debacles:From Theory to Malpractice, 2015, pp 41-45 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Bank Negara — Malaysia's central bank — reported on March 31, 1994 staggering foreign exchange losses of Malaysian Ringgit M$ 5.7 billion (equivalent to $2.1 billion), which followed an even larger loss of M$9 billion in 1992 ($3.3 billion). Jaffar bin Hussein—Bank Negara's long serving governor—was forced to resign on April 1, 1994 the day following the disclosure of the mammoth foreign exchange losses. Under normal central banking practices, such losses would have been the result of costly and legitimate but unsuccessful attempts by Bank Negara's at stemming the rise of its currency due to speculative capital inflows (see Box A). Indeed, in January 1994, The Economist reported that Bank Negara had declared war on “currency speculators,” who were buying Ringgits in anticipation of its appreciation. “But as the world's foreign exchange dealers well know, Bank Negara has long been a big punter in the currency market itself. In the last two years, its boldness has been matched only by its incompetence.” Indeed, as early as 1988, Jaffar had announced that to the traditional goals of providing safety and liquidity in managing its foreign exchange reserves, Bank Negara henceforth would add “profit optimization and market expertise,” which soon became a code word for currency speculation.

Keywords: Derivatives; Debacles; Options; Swaps; Futures; Forwards; Financial Engineering; Market Manipulation; Rogue Traders; Speculation; London Whale (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789814663267_0004 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789814663267_0004 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9789814663267_0004

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().