Hands off approach needed for deposit taking institutions

Regulatory authorities must impose strict standards of propriety and oversight on these institutions as the deposits are the blood, sweat and tears of ordinary folk

COMMENT

By TK Chua

The prime minister has assured Lembaga Tabung Haji (LTH) contributors that their deposits are in safe hands. He says there is no reason for contributors to withdraw their savings since the government is the guarantor of their deposit.

This assurance is timely to pacify depositors given the recent controversy surrounding 1MDB who sold land to LTH for an exorbitant price. But more important is the commitment to uphold high standards and integrity in all financial institutions in the country.

For institutions that accept deposits from the public, financial integrity and confidence are the most important elements. No amount of assurance from the government will help to restore confidence once it is eroded.

I have in mind institutions like banks, PNB (through ASB, ASN, ASM, AS1M, ASW, etc.), LTAT, LTH, EPF and other mutual funds that accept deposits or investments from the public.

It is best that we don’t mess around with these institutions. It is best that the regulatory authorities impose the strictest standards of propriety and oversight on them. It is best that these institutions be helmed by professionals with impeccable integrity and who are able to withstand temptation, coercion and outside interference.

These institutions are the lifeblood of the economy and the deposits are the blood, sweat and tears of the everyday Malaysian. Any hint that the integrity of these institutions is compromised would result in severe consequences.

Government assurances are too late or meaningless once the confidence is lost. Therefore, the best strategy is to manage these institutions without having the need for the government to issue any assurances in the first place. Rightly, confidence should come from these institutions’ adherence to standards, integrity and prudential decision making.

These institutions should not be coerced into making any investment that does not satisfy their risk appetite or returns criteria.

It is just a reminder – don’t mess with these institutions because the consequences could be dire for Malaysia and its people.

TK Chua is an FMT reader