5 BNM warnings, yet no action by Tabung Haji

 

Bank Negara Malaysia (BNM) logo. -- NSTP FILEPIC

THE revelation that Bank Negara Malaysia issued five warnings to Tabung Haji between 2014 and 2017 over its financial position raises a fundamental question: How was the warning from the country's central bank allowed to be repeatedly ignored? Five warnings cannot be dismissed as oversight.

The repeated nature of the warnings suggests that the concerns were known over a prolonged period.

Who was responsible to act on the warnings? The central question is not just whether Bank Negara had warned Tabung Haji, but who received the warnings, what actions were demanded, who decided against acting against the warnings and were these decisions reported to the board or the responsible ministry?

Where was the board? A board exists to provide oversight and challenge the management. Did the fund's governance structure give the board sufficient independence and authority?

Tabung Haji, being a statutory body, is governed by the Tabung Haji Act 1995, meaning the board's statutory powers, duties and governance are regulated by the act.

Following the disclosure of the Royal Commission of Inquiry (RCI) report, the Finance Ministry had reiterated that Tabung Haji's board of directors and management have the primary responsibility for determining its direction and managing its operations.

But it has subsidiaries and associate companies that are governed by the Companies Act 2026, which imposes significant legal duties on directors. The RCI report did point to political interference in Tabung Haji's management and profit distribution.

Did such interference affect the board's and management's decision-making powers, causing the financial distress to spiral into a crisis? Institutions entrusted with people's life savings cannot operate on the basis of hoping that financial problems will eventually resolve themselves.

Were depositors given an accurate picture? This is particularly important because Tabung Haji continued to make profit distributions despite its liabilities exceeding its assets.

No management or board of any substance could have missed these signals. The issue is not merely poor investment performance, but whether financial reporting and public communication gave a misleading impression of the institution's health.

Why did it take a crisis to trigger action? The eventual restructuring and government action may have stabilised the fund, but the bigger lesson is that rescue is never a good substitute for prevention.

Early warnings are useful only if institutions are compelled to respond to them. The reforms must address this precise failure. The proposed amendments to the Tabung Haji Act, including clearer accounting requirements, penalties for misreporting and greater Securities Commission oversight of investments, are welcome.

But the effectiveness of these reforms will depend on whether there are clear lines of responsibility and consequences when warnings are ignored. - NST