June 11, 2018 / 12:20 PM / 9 months ago

UPDATE 1-Former Malaysia c.bank deputy frontrunner for governor job - sources

* Former c.bank deputy Nor Shamsiah seen as favoured candidate

* Nor Shamsiah was part of c.bank’s team investigating 1MDB

* Outgoing c.bank governor Muhammad Ibrahim quit last week (Recasts with candidate choice, adds background)

By Joseph Sipalan and Liz Lee

KUALA LUMPUR, June 11 (Reuters) - A former Malaysian central bank official who was part of an investigating team into beleaguered state fund 1Malaysia Development Berhad (1MDB) is frontrunner to be picked as the next governor of the bank, people familiar with the matter said.

Nor Shamsiah Mohd Yunus, a former central bank deputy governor, is likely to take over from Muhammad Ibrahim who resigned last week, two people told Reuters on Monday, declining to be identified as the talks were private.

Last week, Reuters reported that Nor Shamsiah was on a shortlist of candidates for the job, vacated by Muhammad following a land deal that Prime Minister Mahathir Mohamad’s administration said was used to pay off 1MDB debts. Sukhdave Singh, another former deputy governor, had also been on the short list, sources said.

The prime minister’s office said in a statement on Monday that a candidate has already been identified, but could not reveal the name as it has yet to be officially presented to the King for his consent.

If selected, Nor Shamsiah would be the second female to head the central bank after Zeti Akhtar Aziz, who was the second-longest serving governor having held the post for 16 years from 2000 to 2016.

The central bank declined to comment.

Prime Minister Mahathir said last week he had accepted the resignation of Muhammad as the governor of Bank Negara Malaysia, as the 92-year-old leader purges top officials seen as close to the previous government of Najib Razak.

Following a stunning election victory last month, Mahathir’s administration has reopened investigations into alleged corruption and money laundering at 1MDB.

Muhammad’s exit is seen as a fallout from the 1MDB scandal, after the finance ministry said proceeds from a central bank land transaction with the Najib government were used to clear some of the fund’s dues.

About $500 million raised from the land sale by the government to the central bank was used to pay 1MDB’s liabilities last year, the finance ministry said last month.

The central bank had defended the deal, saying it had initiated the purchase of the land and that the purchase was conducted as an arm’s-length transaction.

Muhammad said he was prepared to relinquish his post if he no longer had the “strong trust and support of the public.”

Nor Shamsiah, who joined Bank Negara in 1987, left the central bank in November 2016 when her term ended, just months after Muhammad’s appointment. She had assisted in the 1MDB investigations when Zeti was the governor. (Additional reporting by Praveen Menon; Writing by A. Ananthalakshmi; Editing by Jacqueline Wong and Sam Holmes)

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