Malaysia PM names new bank chief amid funding scandal

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Malaysia's Prime Minister Najib Razak faces allegations that billions were stolen from state-owned fund 1Malaysia Development Berhad, which he oversees

Malaysia's scandal-plagued prime minister on Wednesday appointed a new central bank governor, who will take over from respected longtime chief Zeti Akhtar Aziz amid a contentious financial scandal.

Prime Minister Najib Razak released a statement saying Bank Negara Malaysia's deputy governor Muhammad Ibrahim would take over from May 1.

Najib faces allegations that billions were stolen from state-owned fund 1Malaysia Development Berhad (1MDB), which he oversees, and his acceptance of a mysterious $681 million payment. Both Najib and 1MDB have repeatedly denied any wrongdoing.

Zeti is respected for her steady hand during 16 years in office and is widely seen to be at odds with Najib over the allegations.

She had announced last year as the scandals escalated that she would retire when her latest five-year term expired at the end of April.

The Harvard-educated Muhammad, 56, was appointed deputy governor in 2010. He has served with the central bank since 1984.

The appointment of a career central bank official is likely to reassure markets amid worries about the transition.

Najib has been accused of blocking scrutiny of the funding allegations -- last year he sacked Malaysia's attorney general, who was investigating the affair -- and there were concerns he would appoint an ally to head Bank Negara.

"It is a pleasant surprise to the financial market. I believe he (Muhammad) will uphold and continue the central bank's policies of integrity and independence even after the 1MDB investigations," said Kenanga Research economist Wan Suhaimi Saidi.

Zeti became Malaysia's first woman central bank boss in 2000.

She has won numerous international accolades for maintaining Bank Negara's credibility and independence and for steady leadership through numerous world economic shocks. Her tenure saw foreign investment flood into Malaysia.

Najib founded state-owned 1MDB in 2009 to fund development projects.

But allegations have emerged that the now financially crippled company was used as a huge slush fund, and multiple investigations have been launched in several countries.

Zeti had become increasingly critical over 1MDB's woes and their potential adverse affects on Malaysian financial markets, but denies she was pressured to leave.