Explain how you handle reserves, PKR tells Tabung Haji chairman

Tabung Haji has yet to come up with a proper policy on how it handles its reserves, and PKR wants the fund's chairman Datuk Abdul Azeez Abdul Rahim to explain. – The Malaysian Insider file pic, February 11, 2016.Lembaga Tabung Haji must explain to the public its financial reserves policy, following Bank Negara's request that the haj fund should come up with one, PKR's Rafizi Ramli said today.

Rafizi said throughout the debate on the fund's finances over the last month, many missed the fact that Bank Negara had actually written to it on December 19, 2014, advising Tabung Haji to come up with a comprehensive reserves policy.

"It goes to show that this issue was actually raised by Bank Negara more than a year ago but there was no concrete actions taken by Tabung Haji chairman Datuk Abdul Azeez Abdul Rahim.

"As such, Bank Negara had to write another letter on December 23, 2015," Rafizi said in a statement today.

He urged Azeez to explain the matter and to give an assurance that Tabung Haji would submit to the central bank a plan for a proper reserves policy by the end of March, as instructed by Bank Negara.

The central bank in a letter dated December 23 last year warned the pilgrimage fund of its reserve levels which were in the negative, hampering its ability to pay dividends and bonuses to depositors.

Section 22 of the Tabung Haji Act also states that the fund cannot announce dividends and bonuses to it contributors if its assets are worth less than its obligations.

Bank Negara said Tabung Haji had only 98 sen in asset for every ringgit in liability.

In her letter to Azeez, Bank Negara governor Tan Sri Zeti Akhtar Aziz (pic, left) said Tabung Haji might have to liquidate its assets within a short period to fulfil its obligations to depositors.

She said this would greatly reduce the value of its assets, and put the stability of the country’s financial and economic system at a higher risk through a “contagion effect”.

This was because it would affect other financial institutions and investors exposed to the assets, place liquidity pressure on banking institutions because of withdrawal of deposits by Tabung Haji, and have a negative effect on investor sentiments, Zeti said.

She blamed the depleting reserves on Tabung Haji’s practice of paying out higher dividends than it could afford since 2012.

"The dividend and bonus payout ratio which has, on average, exceeded its profits (on an average of 107% from 2012-2014) caused Tabung Haji’s already low reserves to decline further, to the extent that it is not able to manage the weak equity portfolio performance for 2015.

"This has caused Tabung Haji’s reserves to be in the negative,” said Zeti in the letter.

Tabung Haji recently announced an annual dividend of 5% for its depositors for 2015, amid the controversy over its dwindling reserves.

For 2014, it had paid out a dividend of 6.25% and a special bonus of 2%. – February 11, 2016.