Bank Islam Malaysia Berhad's reported loss of up to RM700 million is stunning. DAP's Lim Kit Siang and other Malaysian parliamentarians are right to raise questions about the bank's performance. They're also right in demanding answers, and none more so than on behalf of BIMB's depositors.

Yet nobody, not even the media in Malaysia, has asked the right questions which are:

1) Why has Bank Negara been asleep throughout this entire episode? For had it been doing its job, had been on top of its game, it should have known long ago of BIMB's mounting losses. Bank Negara would have then pressed BIMB's board of directors for an immediate explanation and the central bank would have forced the bank to open its books for scrutiny. For all reports, Bank Negara is still asleep.

2) BIMB has made a complete mockery of Malaysia's banking sector reforms following the late 1990s financial crisis that almost buried the Malaysian economy. But it has certainly raised questions not only of the veracity of those reforms - the so-called bank consolidation - but, clearly, serious questions of risk analysis, and the quality and lack thereof.

3) And these matters go directly to the heart of the Malaysian government:

Did it know about BIMB's problems?
When?
Why the inaction?
Has the Finance Ministry been asleep, too?
Will the government bail out BIMB?
Should the government - through an independent body of private sector bankers - investigate Bank Islam?
If fraud is discovered, will the government do the right thing and indict those responsible?
If incompetence is the cause, will the government demand the en masse resignation of BIMB's board of directors who are obviously completely, utterly and miserably incompetent; and
Should the finance minister and the central bank governor be sacked also for their incompetence in this matter?

For all the tough talk of a responsible and accountable government, here is a real test of Prime Minister Abdullah Ahmad Badawi government's resolve because BIMB's stunningly massive loss and incompetence says many things about the nature of risks involving Malaysia's financial sector.

BIMB's losses are a thunderous slap in the face for Malaysia's post-crisis 'reforms', most of which were and remain superficial, to say the least. The old problems of corruption, nepotism and cronyism remain embedded in the structures and institutions of the Malaysian political economy.