2018 Tabung Haji Bailout Averted Massive Deposit Withdrawal, Financial Market Crisis

KUALA LUMPUR, July 31 (Bernama) -- Lembaga Tabung Haji (TH) has described the recovery and restructuring plan implemented in 2018 as a necessary financial bailout to prevent the institution from becoming insolvent, saying that TH would have otherwise faced the risk of a massive deposit withdrawal that could trigger a financial market crisis and undermine the country's economic stability.

It said the government's bailout enabled TH to execute its recovery plan in 2018, thereby safeguarding depositors' savings and ensuring the institution's financial sustainability.

“The profit distribution, in light of the asset-liability gap exceeding RM10 billion as at end-2018, had the potential to trigger a run on deposits and force Tabung Haji to sell its assets at distressed prices to meet large and uncontrollable cash withdrawal requests from depositors,” TH added in a statement today.

According to TH, the recovery plan successfully addressed investment losses amounting to RM12.6 billion, allowing the institution to return to a stronger and more sustainable financial footing, with profit distribution rate increasing from 1.25 per cent in 2018 to 3.5 per cent in 2025, while also rebuilding its reserves for a more stable future.

-- BERNAMA