This article first appeared in The Edge Financial Daily on December 11, 2018

KUALA LUMPUR: As part of its restructuring plan, Lembaga Tabung Haji will be put under Bank Negara Malaysia’s (BNM) supervision effective Jan 1, 2019, to win back depositors’ trust, as the pilgrims’ fund requires stricter governance.

Minister in the Prime Minister’s Department Datuk Seri Dr Mujahid Yusof said the weak governance under the previous management of Tabung Haji had violated the rakyat’s trust.

“For this restructuring of Tabung Haji that we are doing, it is important that the fund is put under the supervision of Bank Negara Malaysia and to be subject to strict financial standards and governance requirements.

“The government is committed in ensuring the recovery of the rakyat and depositors’ trust in Tabung Haji with the new leadership and management team, after what had transpired under the previous management,” he told a press conference yesterday.

At present, BNM does not have regulatory oversight of Tabung Haji, as the fund is only governed under the Tabung Haji Act 1995.

In December 2015, BNM issued a letter of warning to the fund that it needed to strengthen its risk management as a routine check had discovered it had more liabilities than assets. Tan Sri Dr Zeti Akhtar Aziz, the central bank governor at the time, told Tabung Haji chairman Datuk Seri Abdul Azeez Abdul Rahim that the fund had only 98 sen in assets for each ringgit in liabilities.

In another letter to the then minister in the Prime Minister’s Department Datuk Seri Jamil Khir Baharom, Zeti warned that Tabung Haji’s finances could have a financial impact on the government because its deposits are fully guaranteed by the government. She also expressed concern that Tabung Haji had been paying out higher dividends than it could afford since 2012.

Section 22 of the Act states it cannot pay dividends and bonuses to its contributors if its assets are worth less than its liabilities. However, then Tabung Haji chief executive officer Tan Sri Ismee Ismail responded by saying BNM’s evaluation did not take into account the fund’s investment portfolios such as shares, plantation assets and properties.