Malaysia's finance ministry said on Wednesday it would dissolve the board of advisers at 1Malaysia Development Berhad (1MDB) and take over its remaining assets, in an apparent move to scale down a state fund whose scandals have rocked the government.
Parliament's Public Accounts Committee (PAC) last month had called for the 1MDB advisory board, chaired by Prime Minister Najib Razak, to be abolished, after a probe into alleged graft and mismanagement at the fund, whose debt in January had totalled about 50 billion ringgit ($12.5 billion).
The finance ministry, which is the sole shareholder of 1MDB, said in a statement it would also comply with the PAC's recommendation to remove Article 117 and change all references of "Prime Minister" to "Minister of Finance", in the fund's company articles. Najib is also the finance minister.
Article 117 requires the prime minister's written approval for all of 1MDB's financial commitments, including investments, and matters such as the appointment of the board of directors.
Ownership in 1MDB's subsidiaries and land assets in Bandar Malaysia Sdn Bhd, TRX City Sdn Bhd, Air Itam and Pulau Indah will be transferred to the Ministry of Finance Incorporated, the ministry said. It did not say what happens to the debt linked to these assets.
In its report, the parliamentary committee had slammed the board of state fund 1MDB for being irresponsible and urged a probe into its former chief executive, but stopped short of implicating Najib.
The ministry also accepted the resignation of 1MDB's board members, who had collectively stepped down after the release of the report. New board members would be appointed to reflect the limited business profile of 1MDB, it said.
However, 1MDB president Arul Kanda will remain in his role until further notice, the statement said.
"(Arul) will continue to focus on his specific mandate to implement the rationalisation plan, which will include resolution of the recent contractual dispute with IPIC (International Petroleum Investment Co)," the ministry said.
Last week, 1MDB did not meet its deadline to pay a $50.3 million coupon on a $1.75 billion bond following a stand-off with Abu Dhabi sovereign fund IPIC, triggering cross defaults on some of its other bonds.