Bring Arjun, officials before the law - COPE

Oct 29, 2016

The COPE report into the controversial bond issue was presented to parliament last Friday by its chairman Sunil Handunnetti. The report recommends legal action against former CB governor Arjun Mahendran and CB officials. The COPE investigated the controversial Rs. 13.5 billion bond issue on 27 February last year

The report says in the beginning that there is evidence and information that leads to justifiable suspicion that Mahendran had intervened in the bond issue. Towards the end, the report accuses him of being directly responsible.

Giving its recommendations, COPE says there is justifiable suspicion that confidence in the CB has been breached due to its conduct in the bond issue, in which it has not shown full transparency in certain dealings.

COPE observes that one of the primary dealers, Perpetual Treasuries, has earned very big financial profits from the bond issues.

The recommendations of punishment includes that legal action be taken to recover the losses incurred to the state and the public from the responsible CB officials and other institutions.

A post-review is required to ensure that the punishment and other recommendations are implemented.

Parliament should directly intervene and inquire into in order to ensure that the steps, checks and balances to prevent repetition of incidents of this nature, as is its main responsibility towards financial administration of the state.

The CB and other related institutions should implement a mechanism to ensure same.

The COPE report also recommends to the executive that a team of observers be appointed to supervise and post-review the issuance and awarding of financial tenders of the CB.

An institution with legal powers should make an extensive investigation into Perpetual Treasuries having earned an improper profit and take steps to prevent a recurrence.

The CB has a responsibility to speedily investigate if the state or the bank has suffered a financial loss from the bond issue.

Also, a clause of guidelines should be included in CB and other documents that priority should be given to state financial institutions capable of fulfilling unexpected financial requirements of the state.

A post-review of how the CB provides funding to meet financial requirements of the state should be done through a mechanism that will look into the primary and secondary market activities.

The state debt management department’s handbook should be updated with immediate effect, including provisions to give priority to state institutions capable of supplying finances to the state through bond issues.

Also, there is a need to put a mechanism in place and to amend the financial commission act and other related regulations to ensure transparency and safeguard trust in the CB in such transactions.

COPE also recommends an open dialogue in parliament on the report.