June 5, 2018 / 9:16 AM / 2 months ago

Malaysian central bank governor faces exit as shakeup continues, sources say

KUALA LUMPUR/SINGAPORE (Reuters) - Malaysia is in talks to appoint a new central bank governor and an announcement could come as early as Wednesday, two sources have said, part of a government shakeup led by newly elected Prime Minister Mahathir Mohamad.

FILE PHOTO - Ministers and central bank governors including Malaysia's Bank Negara Governor Muhammad Ibrahim (C) attend a photo session at ASEAN+3 Finance Ministers and Central Bank Governors' Meeting on the sideline of Asian Development Bank (ADB)'s annual meeting in Yokohama, south of Tokyo, Japan May 5, 2017. REUTERS/Issei Kato

Mahathir trounced scandal-tainted leader Najib Razak in the May 9 election, promising reforms in tainted state institutions and an end to widespread corruption in the Southeast Asian country.

The 92-year-old Prime Minister has started delivering on this mandate, replacing the attorney general, the anti-graft commission chief, and several other top government officers.

He is now discussing the exit of Governor Muhammad Ibrahim, two people aware of the discussions said. The people did not want to be named because the discussions are private.

“Terms of his (Muhammad’s) exit are being discussed and an announcement on his resignation could come out as early as tomorrow,” one of the people aware of the discussions said on condition of anonymity.

Muhammad, a career central bank official, has finished less than half of the five-year term he began in May 2016.

A source close to the Prime Minister’s office confirmed plans to announce a decision on Wednesday. The source said Muhammad offered his resignation to Mahathir on Tuesday morning. It was not clear if the resignation was accepted.

Bloomberg was first to report, quoting sources, that Muhammad had offered to resign from his post.

A spokesman for Bank Negara Malaysia (BNM) declined to comment on the report. The finance ministry also did not comment.

The move comes after finance minister, Lim Guan eng, said last month that funds from a land sale made by the government to the central bank for about 2 billion ringgit ($502.51 million) were used to pay the liabilities of beleaguered state fund 1Malaysia Development Berhad (1MDB).

Muhammad defended the decision to purchase the plot of land, saying the transaction complied with government requirements. But ruling party leaders questioned the purchase, and alleged that BNM overpaid for the land.

Mahathir has reopened investigations into 1MDB, founded by Najib, which is the subject of a global money-laundering probe. Investigators say billions of dollars have gone missing from the fund.

SUCCESSORS DISCUSSED

Muhammad took over as governor from longstanding chief Zeti Akhtar Aziz, who left after her term ended in 2016.

The two sources said former deputy central bank governor Nor Shamsiah Mohd Yunus is among the candidates being considered to succeed Governor Muhammad, if he resigns.

Nor Shamsiah left Bank Negara Malaysia (BNM) after her term ended in November 2016.

“There are talks being arranged with Nor Shamsiah Mohd Yunus,” the government source said.

Another former deputy governor ,Sukhdev Singh, is also being considered, the source added. Sukhdev stepped down in 2017 after 31 years in office.

No decision has yet been made.

On Tuesday, Mahathir appointed Tommy Thomas as the new attorney general, the first non-Muslim to hold the position since Malaysia was formed in 1963.

Thomas will be tasked with prosecuting people involved in the 1MDB scandal.

Writing by Praveen Menon; editing by Richard Borsuk, Larry King

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