How did the 2018 bank run scenario expose Tabung Haji to potential RM74.5 billion liabilities?

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Government Faced Potential RM74.5 Billion Liability Due to Tabung Haji Bank Run Risk in 2018

In 2018, the Malaysian government faced a significant financial risk, potentially having to assume liabilities amounting to approximately RM74.5 billion had a massive panic withdrawal, commonly referred to as a "bank run," occurred at Tabung Haji. This scenario highlights a critical period where the institution's financial stability was under severe strain, necessitating government intervention to prevent a larger crisis. The risk was underscored by a subsequent panic withdrawal in 2019, which saw RM6 billion withdrawn in a short span following the announcement of a 1.25 per cent hibah for 2018.
Tabung Haji's Technical Insolvency in 2018

By 2018, Tabung Haji was technically insolvent, meaning its liabilities exceeded its assets. This precarious financial state meant the institution was unable to meet its obligations without external support. The announcement of a hibah, a distribution of profit or bonus to depositors, can significantly influence public confidence and deposit behaviour. In this instance, the declared hibah for 2018, which was 1.25 per cent, was made in early 2019.
The RM6 Billion Panic Withdrawal in 2019

The announcement of the 1.25 per cent hibah for 2018 in early 2019 triggered a panic withdrawal, leading to net withdrawals of RM6 billion within a brief period. This event serves as a concrete example of the sensitivity of depositor behaviour to the institution's financial performance and payout announcements. The minister in charge of religious affairs, Dr Zulkifli Hasan, posed a rhetorical question regarding the potential scale of withdrawals had no hibah been declared at all, implying the situation could have been far more severe.
Restructuring Plan by the Pakatan Harapan Government

To address the financial distress and restore Tabung Haji's solvency and long-term sustainability, the Pakatan Harapan government implemented a restructuring plan. This intervention was crucial in stabilising the institution and safeguarding depositors' funds. The specifics of the financial instruments or guarantees that would have led to the RM74.5 billion liability in a full-scale bank run scenario remain a key aspect of the financial assessment during that period.

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How did the 2018 bank run scenario expose Tabung Haji to potential RM74.5 billion liabilities?

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