Saturday June 23, 2018

Sri Lanka bond probe: Perpetual bought bonds with EPF billions

Apr 05, 2017 07:37 AM GMT+0530 | 1 Comment(s)

ECONOMYNEXT - Perpetual Treasuries, a controversial gilt dealership linked to ex-Central Bank Governor Arjuna Mahendran's son-in-law had borrowed billions of rupees from the Employees Provident to pay for its bond purchases, a commission of inquiry heard.

To pay for bets made at auctions of March 29 and March 31, Perpetual Treasuries had borrowed 6.0 billion rupees through two repurchase deals from the EPF, K Alwis, additional director of the central bank's information technology department said.

Alwis was giving evidence on cash and securities transactions made by Perpetual Treasuries through the central bank's clearing and settlement systems, to a commission of inquiry appointed by President Maithripala Sirisena to go into alleged frauds committed on bond deals in 2015 and 2016.

The March 2016 bond auctions were among the most controversial, where Perpetual Treasuries bid for large volumes of bonds and paid for them with money taken from the Central Bank on April 01.

The EPF is also managed by the central bank.

Deputy Solicitor General Milinda Gunatilleke leading evidence asked whether the cash could have been used by the EPF to invest directly in the bond auctions.

In a controversial 2015 auction, Perpetual had borrowed money from state-run Bank of Ceylon to pay for bonds.

Replying Justice Prasanna Jayewardene de Alwis said clearing system data showed that 2.3 million rupees had been paid to the EPF by Perpetual Treasuries for the first repo deal of 3.5 billion rupees.

Perpetual Treasuries had also borrowed 10.5 billion rupees from the daily reverse repo auction of the central bank, the inquiry was told.

A total of 19.9 billion rupees had been borrowed from the intra-day liquidity facility (ILF) of the central bank, for which no interest is paid.

"This is free money not a borrowing," Gunatilleke said.

Totalling up data in the clearing system showed that Perpetual Treasuries had borrowed 19.9 billion rupees from the ILF and 10.5 billion rupees from overnight facilities, Gunatilleke said. Private parties had provided only 13 billion rupees, he said.

Perpetual Treasuries eventually defaulted on 11.06 billion rupees of borrowings from the ILF, de Alwis said.

Perpetual had also defaulted on a reverse repo auction.

Gunatilleke said the default deprived other market participants of money and the government. De Alwis said the central bank could not inject money to the market as intended through the auction.

Answering Justice Jayewardene de Alwis said some of the securities which Perpetual agreed to provide for the reverse repo transaction had been pledged to the intra-day facility. (Colombo/Apr05/2017)



  1. Raji April 05, 08:55 AM

    Central Bank was always under Finance Minister. For the 1st time Sri Lankan premier Ranil Wickramasinghe removed it from Finance Ministry and brought it under his direct supervision and control by assigning CB under his ministry. He went on to appoint Arjun Mahendran, who is a trusted confidant and buddy of Ranil. On the day of the tabling of the report of the 1st COPE which probed Feb 2015 Bond scam, Ranil persuaded President Sirisena to dissolve the Parliment and prevented it being tabled and debated. He went on to say that the Supreme Court had acquitted Mahendran. The ruling Ranil was referring to was delivered by a bench presided by the then Chief Justice K Sripavan. Then came the 2nd scams in March 2016 after which Sirisena decided not to extend Mahendran's term. Prime Minister Ranil was adamant and made every effort to secure an extension for Mahendran. After President Sirisena removed Mahendran, Prime Minister Ranil continued to have Mahendran as his advisor and he thereafter sat along with PM at some meetings involving CB as well. The golden question is whether the Presidential Commission of Inquiry should question Prime Minister Ranil Wicktamasinghe to ascertain whether he was aware as the Minister of all these? If he was not aware he is not competent and fit to be the Minister in charge of CB. If he was aware then he is not morally fit to continue as Sri Lanka's Prime Minister and a further probe will be required to ascertain whether he had a hand in these bond scams. Ranil should clear his name especially as he is directly overlooking the Financial Crimes Investigation Department, FCID which is probing financial irregularities committed by Opposition members who are not part of the government

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