Silicon Valley Bank collapse has lessons for EPF

 

From Nehru Sathiamoorthy

The recent Silicon Valley Bank (SVB) collapse serves as a warning to those who argue that Employees Provident Fund (EPF) contributors should be allowed to withdraw their savings.

Ads by Kiosked

Stay up-to-date by following FMT's Telegram channel

FMT

While it is difficult to imagine how EPF, our behemoth of a pension fund, with an asset size of RM998 billion, or almost a trillion ringgit, will ever run into trouble, let us not forget that the SVB of the US also had over US$200 billion dollars, or close to a trillion ringgit, in assets right before it spectacularly collapsed in a matter of a couple of days last week.

To put it simply, the SVB collapsed when poor economic conditions in the tech industry caused an increase in the amount of withdrawals from its accounts at the same time that its investments were facing losses. SVB collapsed when it was unable to liquidate investments sufficiently to meet the withdrawals.

The EPF went through two rounds of withdrawals under the Muhyiddin Yassin and Ismail Sabri Yaakob administrations. Will a third round of withdrawals under Anwar Ibrahim bring it to its knees?

If a third round of EPF withdrawals is approved and the number of EPF contributors withdrawing savings from their EPF accounts exceeds expectation, and if EPF is unable to liquidate assets fast enough, the market’s confidence in the EPF, and probably the Malaysian economy, will be shaken.

This loss of confidence could lead to a cascading series of negativity for EPF and the Malaysian economy.

While the government of Malaysia will be obliged to bail out EPF if it is in trouble, historically, it is often the EPF that has bailed out the government of Malaysia when it was in trouble. How much can you depend on someone who depends on you for help?

Ads by Kiosked

Let us also remember that the government of Malaysia itself is RM1.5 trillion in debt. Surely there is a limit to how much help such an indebted government can offer.

Whatever is happening in our political landscape, let us hope that our representatives and leaders do not forget to pay attention to the state of EPF as a whole and the state of our individual EPF accounts for not only our sake but also theirs.

For as long as people can see that they can live with a modicum of dignity and self-respect until their last days, people can bear with a lot of confusion and inequity in their lives and just keep trudging along. To foresee a life of dignity and self-respect, we must also foresee a reasonable amount of wealth in our life, and to foresee such an amount of wealth, the status of our EPF savings is pivotal. - FMT

Nehru Sathiamoorthy is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.