BNM warned Tabung Haji 5 times over high payouts, says minister

Religious affairs minister Zulkifli Hasan revealed that Bank Negara Malaysia (BNM) issued five warnings to Tabung Haji (TH) between 2014 and 2018 over the risks associated with high profit distributions. These warnings were sent to TH's chairman and the minister responsible for religious affairs at the time, emphasizing that such practices could expose the pilgrims fund to serious problems in case of large-scale withdrawals.

Zulkifli explained that these warnings arose due to concerns about the impact of high profit distributions on TH's already low reserves, which could potentially become negative.

The minister highlighted that the warnings were ignored until TH's financial problems escalated, with the deficit between its assets and liabilities reaching over RM10 billion in the fourth quarter of 2018. This put TH at risk of facing a bank run, and efforts to secure contingency financing also proved unsuccessful. If TH were to collapse, the government would be responsible for assuming liabilities amounting to around RM74.5 billion, as TH's deposits are fully guaranteed by the government.

The crisis was further exacerbated by the Malaysian Financial Reporting Standards changes made by TH in 2017, which enabled the institution to report higher profits for that year despite its actual financial performance. The auditor-general's review of TH's 2017 financial statements revealed that only RM556 million of assets worth RM4.6 billion had been assessed by professional valuers, leading to the declaration of high profit distributions.

This decision violated the Tabung Haji Act and constituted significant non-compliance, as TH had actually recorded a net loss of RM1.4 billion in 2017 rather than the RM3.4 billion profit initially reported.