Parti Amanah Negara would want to remind Tabung Haji and the government of a serious possibility of facing the rakyat’s wrath ie of a massive street protest, if the board of directors are deemed or perceived to have failed in their fiduciary responsibilities.

Admission of the fact by Tabung Haji’s CEO that the news report about Bank Negara Malaysia (BNM) warning the pilgrims’ fund that its liabilities exceeded its assets is true is indeed serious.

He sought to assure contributors that their deposits were safe and that Tabung Haji was not in any financial difficulty, despite the report that as at September 2015, there are RM56.72 billion worth of assets to cover RM57.9 billion of deposits, ie a shortfall of RM1.158 billion.

Tabung Haji should take this as a “stern and categorical” reminder from the central bank as a regulatory body. While we know that the management work hard to fulfill their responsibilities, the directors are reprimanded that their fiduciary roles are as well to safeguard and defend the religious and economic interests of the 8.8 million depositors.

BNM’s letter contained serious and strong reminders revolving around the urgent need to frame and articulate a comprehensive reserve policy and to improve and implement on the best practise on bonus and dividends payout.

Tabung Haji’s failure to heed the reminders could have a systemic impact on not only the finances of the government as Tabung Haji is wholly-owned and guaranteed by it. It will also have an adverse systemic impact on the country’s financial system

The core issue of payment of bonuses appeared to be foremost in the list of BNM’s concerns as it pertains to the issue of best practice in risk management and reserve policy.

From 2012 to 2014, Tabung Haji made payments of bonuses-and-dividends to profit exceeding 107 percent. This practice of paying higher dividends than it could afford has caused Tabung Haji’s reserve to deplete and is unsustainable.

A dividend is a payment made by a corporation to its shareholders when it earns profit or surplus and not through liquidating assets. That is basic. Why the delay in announcing this year’s dividends seems quite conspicuous.

Because of the weak portfolio performance in 2015, ( not making enough profit), the low reserve has in fact gone into the negative range.

A worst-case scenario could be triggered when the 5 percent of depositors who own 75 percent of the total deposits make a simultaneous withdrawal for reason of market panic or whatever. Tabung Haji would suffer a systemic collapse, although these are institutional depositors who arguably would be unlikely to do it.

We would also like to remind Tabung Haji not to be caught in controversies, in the light of trying to pander to Putrajaya’s needs as in the 1MDB land purchase. It is perceived as arguably at the expense of the interest of depositors, to cite but one glaring example.

We register our detestation for the appointment of attorney-general (AG) Apandi Ali as a member of the Tabung Haji board as it is totally uncalled for and insensitive. Especially after the handing down of what is another 'No Further Action' kind of verdict, the appointment is at best problematic.

Everyone knows that the AG is retiring in the next two months, but the PM could be a little ‘smarter’. The rakyat can’t help but to be presumptuous.

DZULKEFLY AHMAD is Parti Amanah Negara strategy director.