BNM advice to TH was pre-emptive measure to avert financial risks
KUALA LUMPUR: Bank Negara Malaysia (BNM)’s advice to Lembaga Tabung Haji (TH) was a pre-emptive measure to ensure the institution's financial position remained sound.
Bank Negara Malaysia (BNM) advised Lembaga Tabung Haji (TH) to maintain its sound financial position and prevent any potential systemic risks to Malaysia's financial system, even though TH is not directly supervised by BNM. This pre-emptive measure was communicated to TH's board of directors and the responsible minister. Although BNM issued five warning notices to TH and the minister between August 2014 and September 2016, highlighting TH's financial position, reserve levels, and liquidity management, it also emphasized its responsibility to monitor and identify risks to overall financial stability under the Central Bank of Malaysia Act 2009.
This monitoring includes major non-bank financial institutions with significant interconnections to the financial system, supported by the Financial Stability Executive Committee (FSEC). Dr. Zulkifli Hasan, a minister, explained that TH's management had been warned five times about the widening gap between its assets and liabilities, which posed a potential systemic risk to financial stability.
The Auditor-General's emphasis of matter on changes to TH's impairment policy also contributed to the institution's reassessment by international audit firm PricewaterhouseCoopers (PwC) in 2018. The 211-page Royal Commission of Inquiry (RCI) report on TH, released on July 29, contained 25 recommendations for improvements, with 75% already implemented by the institution as of July 30.
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