{"id":104266,"date":"2020-07-05T16:15:46","date_gmt":"2020-07-05T23:15:46","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=104266"},"modified":"2020-07-05T16:15:46","modified_gmt":"2020-07-05T23:15:46","slug":"what-are-credit-irregularities-and-how-they-are-determined","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/07\/05\/what-are-credit-irregularities-and-how-they-are-determined\/","title":{"rendered":"WHAT ARE CREDIT IRREGULARITIES AND HOW THEY ARE DETERMINED?"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

A\nrecent statement of the Prime Minister, Mr. Mahinda Rajapaksa after meeting\nwith executives of Ceylon Bank Employee\u2019s Union regarding the investigation on\nthe irregular credits of government banks during the Yahapalana Regime,\nexpressed that the government is willing to appoint an investigation commission\nto consider the irregularities incurred in credit approval of government banks.  It is a vital action, however, many former\nbankers in state banks have a question why this investigation limits to the\nperiod of the Yahapalana Regime, and why couldn\u2019t extend further covering from\n1978 to 2019. The investigation of credit irregularities in government banks is\nnot limited to a political issue, but it is an issue to entire bank management\nand concerning issues for maintaining viable credit assessment in the country.\nIn early 1990 decade credit approval was a serious issue in government banks\nand the weak management forced the owner government to allocate a large volume\nof budget funds to increase capital of government banks as the failed credits\nwas written off from the bank capital, banks supposed to come to a negative net\nworth. This issue impacts the payment system of the country. <\/p>\n\n\n\n

During\n1978 – 2019, many credit irregularities recorded in government banks and\nwhether they were politically motivated or dishonesty of credit management in\ngovernment banks are critical questions to be investigated by a commission.\nSometimes, members of Ceylon Banks Employees Union may have involved in the\ncredit irregularities and it might reveal that CBEU in some instances acted to\nprotect members who participated in irregular activities than considering\njustice to the country.  Many bank\nemployees are of opinion that CBEU protected only the favourite members of the\nunion and the management.<\/p>\n\n\n\n

There\nmay be evidence that corrupt executives of government banks protected credit\nofficers and managers who were members of CBEU. \nIf the government appoints a commission it should be covered a broader\narea and independent members, knowledgeable and competent members should be\nincluded to the proposed commission.<\/p>\n\n\n\n

Credit\nirregularities in government banks have done damages to the economy as well as\nto the structure of government banks.<\/p>\n\n\n\n

I\nparticipated in a risk asset review in corporate lending and retail lending in\nbranches.  The following are irregular\nactivities detected.<\/p>\n\n\n\n

  • Approving credit on the\nrequest of politicians without assessing the creditworthy of customers<\/li>
  • Approving credits to friends,\nrelatives of bank management without assessing the customers quality<\/li>
  • Approval of credits\ntaking commission or bribery from customers and such actions were not involved,\npoliticians<\/li>
  • Some credit officers\napproved credits to customers without properly assessing credit proposals<\/li>
  • Credit officers who\napproved credits were not properly trained by the banks to assess customers\ncredit quality (Industry environment, Competitive position, collateral quality,\ncredit structuring, and credit distribution covenants<\/li>
  • Credit officers approved\ncredit without the knowledge of accounting, for example, millions of credits\ngranted to customers who had paid up-capital only Rupees 100 but the authorized\ncapital was billions.  It was a cheating<\/li>
  • Some customers financial\nstatements indicated that money was given to credit officers and such money\nindicated as expenses in the income statement<\/li>
  • Bank managers must daily\nmatch the volume of deposit and credit balance to protect from the potential\nliquidity problems and without doing this practice, credits were approved and\nthe banks faced to liquidity problems and had to borrow from overseas to settle\nthe problem.<\/li><\/ul>\n\n\n\n

    Above\nwere only a few irregularities, but many were recorded.<\/p>\n\n\n\n

    Failing\ncredit repayment is natural in any country, however, credit management in\ngovernment banks treated these issues as simple matters, and some dishonest\nmanagers were sent to overseas branches and honest managers were discriminated.<\/p>\n\n\n\n

    These\nissues need to investigate and develop policies to protect government banks.  <\/p>\n","protected":false},"excerpt":{"rendered":"

    BY EDWARD THEOPHILUS A recent statement of the Prime Minister, Mr. Mahinda Rajapaksa after meeting with executives of Ceylon Bank Employee\u2019s Union regarding the investigation on the irregular credits of government banks during the Yahapalana Regime, expressed that the government is willing to appoint an investigation commission to consider the irregularities incurred in credit approval […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-104266","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/104266","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=104266"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/104266\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=104266"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=104266"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=104266"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}