Kuala Lumpur - Bank Negara Malaysia (BNM) deputy governor Muhammad Ibrahim is the frontrunner to succeed governor Zeti Akhtar Aziz and his appointment is expected to be announced later in the month, according to a Malaysian newspaper.
Slightly more than three months to Ms Zeti's scheduled retirement, the central bank governance committee has narrowed the candidates' list down to Mr Muhammad, The Malaysian Reserve reported on Tuesday, quoting unnamed industry sources.
Mr Muhammad has spent over three decades with Bank Negara and if his appointment is consented to by the King, it is likely to go down well with investors given his experience and expertise.
Malaysia University of Science and Technology School of Business dean Yeah Kim Leng said a career banker, especially with central banking experience, would be preferable to an external candidate as the transition would be smoother. "Many prefer someone with long experience in central banking to be the successor, especially as central banking has become more complex," he observed. Formerly RAM Holdings group economist, Mr Yeah is currently one of two external members of Bank Negara's monetary policy committee.
As he has been put through the spectrum of central banking at BNM, Mr Muhammad is seen as having accumulated the expertise and interaction skills necessary for the job. However, while the governance committee has some independence in the selection of Ms Zeti's successor, it is unclear if its decision needs to be endorsed by the Finance Ministry, headed by Prime Minister Najib Razak.
Investors, already troubled by state-owned 1MDB's financial controversies, will be keeping a close watch on the appointment of the country's eighth central bank governor, particularly since Ms Zeti did not see eye-to- eye with other key institutions on 1MDB. Invariably, she and BNM found themselves enmeshed in the controversial deposit of nearly US$700 million into Mr Najib's personal bank accounts over 2013-2015, with many questioning the lack of action. Mr Najib has insisted the funds were a political donation from the Middle East but has refused to identify the donor.
Even when BNM recommended that 1MDB, whose advisory panel is headed by Mr Najib, be prosecuted for breaches under the Exchange Control Act, its recommendation went unheeded because Attorney-General Mohd Apandi Ali disagreed.
Given the trust deficit in the government, bankers say it is important to appoint someone who commands the respect of financial markets and is seen to have the requisite skills and independence to helm the central bank.
Ms Zeti had previously voiced her preference for an internal successor and indicated BNM already had a succession plan in place. Appointed deputy governor in 2010, Mr Muhammad is the most senior of the three deputies, the other two being Nor Shamsiah Mohd Yunus and Sukudhew Singh.
This article was first published on January 14, 2016.
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