Arjuna Mahendran not directly involved in treasury bound issue: committee

Full statement issued by the Ministry of Policy Planning and Economic Affairs..

April 19, 2015 

The committee of eminent lawyers which inquired into the 30-year Treasury Bond issuance has made far reaching recommendations to ensure transparency and better governance at the Central Bank.

The three-member Committee had interviewed a large number of individuals, including the governor, officials from the Central Bank, primary dealers and Perpetual Treasuries.

Several deficiencies in the bank’s Public Debt Department (PDD) which handles all matters relating to servicing the domestic and foreign debt of the government of Sri Lanka was observed by the Committee.
Since the PDD is dealing with the most sensitive information of the government, the committee is of the opinion that a proper supervisory and monitoring mechanism has to be immediately implemented with regard to its activities,” the committee said in its 19-page report.

However, the committee found that Governor ArjunaMahendran had no direct role in deciding to accept bids over and above the one billion rupees stipulated in the 30-year bond tender and accept up to 10 billion rupees. The PDD had projected the government’s funding requirement as at 2nd March 2015 at 13.55 billion rupees.

Even though the minutes of the Monetary Board number 4/2015 specifies to issue a 30-year treasury bond, the amount of the bond has not been decided by the Monetary Board (of which the governor is the chairman).

This exercise is vested with the PDD as per the Operational Manual of the PDD. The decision to accept the excess amount has been taken by the Tender Board Committee that comprises eight members.

The governor of Central Bank of Sri Lanka is not a member of the Tender Board Committee.

The Committee concluded that there was no evidence to the effect that the governor had direct participation with regard to the activities of the PDD and the Tender Board Committee.

However, the Committee noted serious lapses on the part of the Bank of Ceylon (BOC) through whom Perpetual Treasuries had routed an unusually large amount of bids for the 30-year bond.

The Committee observed that the bidding pattern of Perpetual Treasuries was unusual and warranted a further investigation.

It noted that the Bank of Ceylon should also carry out a forensic audit and seek explanations from its Chief Dealer and others on ad-hoc decisions risking a large amount of BOC funds involved in the 30-year bond transaction.

The three-member Committee that looked into the 30-year bond issue consisted:

GaminiPitipana (Attorney-At-Law)
Chairman
Mahesh Kalugampitiya (Attorney-At-Law)
Committee Member
ChandimalMendis (Attorney-At-Law)                                                   
Committee Member