Silicon Valley Bank collapse has lessons for EPF

Silicon Valley Bank collapse has lessons for EPF FMTNews

The recent Silicon Valley Bank collapse serves as a warning to those who argue that Employees Provident Fund contributors should be allowed to withdraw their savings.

To put it simply, the SVB collapsed when poor economic conditions in the tech industry caused an increase in the amount of withdrawals from its accounts at the same time that its investments were facing losses. SVB collapsed when it was unable to liquidate investments sufficiently to meet the withdrawals.

If a third round of EPF withdrawals is approved and the number of EPF contributors withdrawing savings from their EPF accounts exceeds expectation, and if EPF is unable to liquidate assets fast enough, the market’s confidence in the EPF, and probably the Malaysian economy, will be shaken. While the government of Malaysia will be obliged to bail out EPF if it is in trouble, historically, it is often the EPF that has bailed out the government of Malaysia when it was in trouble. How much can you depend on someone who depends on you for help?

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