A qualified Australia-certified Chartered Accountant in all his wisdom once said,
"For banks to allow (the) extension (of a loan repayment by one month), this also shows that they have a certain confidence in the company (1Malaysia Development Berhad, 1MDB).”
Banks are commercial entities. They lend money to earn fee or interest income from a client. Should they feel that a client is capable of repaying the loan, they would be happy to extend a loan for 1 year, 3 years or even 5 years. They would not be so silly to extend for just one month only. Extending a loan on a month by month basis is administratively cumbersome. It is only done for a problematic loan.
Their comments confirmed my logical thinking. If a person has confidence in you, he will be looking at a business or friendly relationship on a long term. One month cannot be considered long term. Hence, the purported words of wisdom must be misguided...
There are a few analogous scenarios that we can analyse further:
- Personal Relationship. Your girlfriend is asking for a breakup due to your misbehaviour. You want the relationship to stay, and you ask for more time to improve the situation. You want to be a better person for her. She turns around and says that she is only giving you one month to try. This can not be a case where she has the confidence that you will improve and make things better.
- Business Relationship. You have been buying goods from this particular supplier on 30 day credit terms. You are allowed 30 days after receipt of goods before you pay. You ask for a longer credit period due to the commercial relationship. You are aware that the supplier grant longer credit terms to other customers. To your surprise, your supplier refuse and remain the 30 days credit terms with you. This cannot be a situation where you can think that your supplier has confidence in your credit strength.
- Personal loan. If you need some money for an urgent and immediate need but you require a year to save enough money. You may try to borrow from your good friend to attend to this immediate need. You know that your good friend is wealthy and can well afford to spare the cash. However, your friend is only willing to lend you the money for one month. Although there may be other reasons to explain this, it cannot be interpreted as a sign of confidence that he has in you.
Logically, this qualified Australia-certified Chartered Accountant is erroneous to think that one month loan extension is a sign of confidence in 1MDB. Indeed, he should know that this is a vote of no-confidence or a clear sign of lacking in confidence on the part of the banks. It should not take a genius to know this.
Yet, the words came out of a Deputy Minister and a qualified Australia-certified Chartered Accountant. This self-claimed Australia-certified Chartered Accountant is Chua Tee Yong, who is the Deputy Minister in Finance Ministry of Malaysia. He is one of the children of Chua Soi Lek, who was once a President of Malaysian Chinese Association (MCA) in the governing coalition of Malaysia, Barisan Nasional.
Please refer to the below for more details on 1MDB RM2 billion loan extensions:
http://www.themalaysianinsider.com/malaysia/article/deputy-minister-says-loan-extension-shows-banks-confidence-in-1mdb
http://www.bloomberg.com/news/articles/2015-01-27/1mdb-seeks-loan-extension-before-3-billion-ipo-of-energy-assets
http://www.themalaysianinsider.com/malaysia/article/bank-negara-powerless-to-act-on-1mdb-loan-extension-request-says-report
http://portalkini.net/?p=17643
