No policy decision to ask state banks to make lower bids at bond auctions PM testifies before bond probe commission
Posted on November 20th, 2017

By Shamindra Ferdinando Courtesy The Island


Prime Minister Ranil Wickremesinghe yesterday said the government hadn’t taken any policy decision to instruct the state-owned banks to make bids at the treasury bond auctions at lower interest (yield) rates.

PM Wickremesinghe said so answering a question posed by Attorney General Jayantha Jayasuriya, PC, who led the Attorney General’s Department team assisting the Presidential Commission of Inquiry probing treasury bond scams involving the Central Bank of Sri Lanka and Perpetual Treasuries Pvt Ltd (PTL).

The commission comprises Supreme Court judges K. T. Chitrasiri (Chairman), P. S. Jayawardena and retired Deputy Auditor General K.Velupillai.

Asked whether the state banks had made bids at lower yield rates in accordance with a government policy decision, the Prime Minister emphatically denied having taken any such policy decision.

The chairmen and senior officials of three major state banks––the Bank of Ceylon, the People’s Bank and the National Savings Bank––early last month told the commission that on two occasions in 2016, they had received instructions from the then Finance Minister Ravi Karunanayake to make bids at the treasury bond auctions at lower interest (yield) rates.

At the commencement of the proceedings, Justice Chitrasiri said that the commission had requested AG Jayasuriya to lead his team of officers on the final day of the proceedings.

Justice Chitrasiri said that PM Wickremesinghe was there to make some clarifications with regard to the questions he had provided answers to by way of affidavits previously. He explained that the commission had received the PM’s responses to 28 questions first and 20 more questions sent to him later on.

Justice Chitrasiri emphasised that the question of compelling PM Wickremesinghe to appear before the commission had never arisen.

In answer to another query, the PM said the Banking Supervision Division had been weak and some non-banking finance institutions were on the verge of collapse.

The PM has, in his affidavits, denied having knowledge of the meetings the then FM Karunanayake had had with senior officials of the state banks.

Asked whether R. Paskaralingam had been present at those meetings, the PM said that, in his capacity as advisor to the PM, Paskaralingam had attended many meetings. He said that Paskaralingam didn’t report to him on a daily basis.

PM Wickremesinghe was also asked whether he was aware that Central Bank Governor Arjuna Mahendran’s son-in-law Arjun Aloysius being Chief Executive and a director of the primary dealer PTL. The PM said he had asked Governor Mahendran to ensure that the latter’s son-in-law did not get involved with the company and divested his shares. The PM said he had received repeated assurances from Governor Mahendran that his concerns would be addressed, but those promises hadn’t materialised.

The commission also sought further clarification from the PM as regards a controversial government decision to do away with direct placements and introduce public auction mechanism. The PM, while acknowledging that he had told Governor Mahendran to consider issuance of bonds through auctions, said that he had expected the Governor to follow the due process.

PM Wickremesinghe explained four telephone calls that had been received from Mahendran in late February with regard to the issuance of treasury bonds and perhaps some other matters. He quoted Governor Mahendran as having told him, ‘Don’t worry Rs. 10 bn have been raised at the auction’.

Answering query about changing of CBSL practice of raising funds by way of direct placements after the change of government in January 2015 to pave the way for the auction method and then reverting to the old system in July this year, Wickremesinghe said it was due to a role played by the US Treasury; a mix system had been adopted by Sri Lanka. He said the July 2017 change had been introduced following a thorough study though it hadn’t been the case in 2015.

Referring to Governor Mahendran’s involvement with W. M. Mendis, PM Wickremesinghe pointed out that former Governor’s (Ajith Nivard Cabraal’s) sister had been with Perpetual Treasuries during the previous administration.

The PM explained the circumstances under which he had appointed the three-member Pitipana Committee. He mentioned the first COPE Committee headed by the then MP D. E. W. Gunasekera.

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