Call for ‘fit and proper’ test for CB governors following bond controversy

ECONOMYNEXT – A governance activist has called for ‘fit and proper’ tests when appointing the governor of the Central Bank following conflicts of interests involving the incumbent Arjuna Mahendran and allegations of bond auction rigging and insider dealing.

Chandra Jayaratne, a former head of Sri Lanka’s Ceylon Chamber of Commerce, wrote to President Maithripala Sirisena asking only persons free of conflicts of interest to be appointed as Central Bank Governor.

Sri Lanka’s current administration has been rocked by allegations of bond auction rigging and insider dealing involving a bond dealership owned by a relative of incumbent governor Arjuna Mahendran.

The full letter to President Maithripala Sirisena is reproduced below:

President Maithripala Sirisena,
President of Sri Lanka,
Presidential Secretariat,
Janadhipathi Mawatha,
Colombo 1.

Dear Mr. President,

“Fit and Proper” Affidavit and Declarations are Essential Pre-Requisites in the Appointment of the Governor of the Central Bank

Recognizing that Fitness and Propriety (honesty, integrity and reputation, competence, capability, and financial soundness) of the Governor of the Central Bank is an essential requirement to ensure the effective operation, good governance and risk management in the conduct of affairs and operations of the Central Bank of Sri Lanka, in compliance with the provisions of the Monetary Law Act; and

Recognizing further that no person shall be appointed to such position unless that person is a “fit and proper person” to hold such office:

I appeal to you, to kindly call all aspirants seeking nomination or being nominated by the government for the post of the Governor of the Central Bank, be called upon to file duly sworn affidavits and declarations of such aspirants or nominees being “fit and proper persons” to hold the post of Governor of the Central Bank.





The aforesaid affidavits and declarations submitted to you must, inter alia, state that such aspirant and or nominee;

1. Is not subject to at present, nor have been subjected to whilst holding any office previously, nor will be subject to following such appointment, to

a. the disqualification in terms of section 11(1) of the Monetary Law Act, and
b. a further disqualification of being a director, officer, employee, consultant, advisor or shareholder of any banking institution (other than the Central Bank) or any other financial services institution, and

c. a further disqualification being in any other position or office in any other institution or in a contractual relationship or related party commitment, which may be in conflict with the role and responsibility as the Governor of the Central Bank;

2. Is not subject to, nor have been subject to whilst holding any such office previously, nor will be subject to upon fresh appointment,

a. to any forms of conflicts of interest or related party transactions with close members of the family ( including the spouse, children, mother, father, father in law, mother in law, sons in law, daughters in law and step children or any institution controlled or influenced by them), and

b. shall agree to avoid all such situations of personal interest or related party transactions or any such situations of potential conflicts of interest or related party transactions, or be in a situation where any such personal interest might appear to conflict with the position of responsibility as the Governor of the Central Bank or be perceived as having given preference to personal or family interests;

3. Have not been alleged to have engaged directly or indirectly, in any acts of market abuse, market manipulation or insider dealings, and shall hold all information, data, other price sensitive information, and policy decisions of the Monetary Board, received or known in the course of office, in strictest confidence as required, and will not engage in any manner in passing classified information or in directly or indirectly dealing in insider information, or in market manipulations or market abuse;

4. Shall devote his full professional time to the business of the bank; and accordingly shall not accept or hold any other office or employment or accept any consultancy or advisory positions or any other position whatsoever, whether public or private, and whether remunerated or not: (Provided, however, that nothing in this undertaking shall be deemed to prevent from accepting or holding any academic office or position or any office or position in an institution or organisation, established for the purpose of carrying on research in the subjects of economics, money, banking, statistics and finance, or from being appointed to be or acting as a member of any commission constituted under the Commissions of Inquiry Act for the purposes of any inquiry relating to monetary, banking, financial or general economic matters or questions affecting the national welfare of Sri Lanka, or of any council, committee, or other body investigating or examining, or advising upon, any such matters or questions);

5. Possesses academic or professional qualifications or effective experience in banking, finance, economics, business or administration or of any other relevant discipline;

6. Is a citizen of Sri Lankan domiciled in Sri Lanka;

7. Is not over 70 years of age as at the date of appointment;

8. Has not been found by any court of law, regulatory or supervisory authority, professional association, Commission of Inquiry, tribunal or other body established by law in Sri Lanka or abroad, to the effect that such person has committed or has been connected with the commission of, any act which involves fraud, deceit, dishonesty, improper conduct or non-compliances with provisions of any statute or rules, regulations, directions, codes of conduct and ethics, or determinations issued there under;

9. Has not been convicted by any Court in Sri Lanka or abroad in respect of an offence involving criminal activity;

10. Has not been found guilty of an offence of moral turpitude involving conduct that is considered contrary to community standards of justice, honesty or good morals;

11. Has not been declared insolvent or declared bankrupt in Sri Lanka or abroad

12. Has not failed to satisfy any judgment or order of any Court whether in Sri Lanka or abroad, or to repay a debt

13. Has not been declared by a Court of competent jurisdiction in Sri Lanka or abroad, to be of unsound mind;

14. Has not been removed or suspended by a regulatory or supervisory authority from serving as a director, chief executive officer or other officer or an employee in any licensed bank, finance company, Primary Dealer Company, financial institution or a corporate body in Sri Lanka or abroad

15. Has not been a director, chief executive officer or held any other position of authority in any licensed bank, finance company, Primary Dealer Company or financial institution, whether in Sri Lanka or abroad;

(i) whose license or business has been cancelled or suspended on grounds of regulatory concerns; or

(ii) which has been wound up or is being wound up, or which is being compulsorily liquidated;

The aspirants and nominees seeking appointment to the office of the Governor of the Central Bank must, along with the affidavit and declaration of “fit and proper person” , file a declaration of Assets and Liabilities, in terms of the Declaration of Assets and Liabilities Law.

Such affidavits and declarations of fit and proper persons received from aspirants or nominees must be transparently available to public for examination and comment prior to nomination as the Governor of the Central Bank.

I remain confident that this appeal made to you in the interest of upholding transparency and good governance will receive your immediate careful consideration

Yours Sincerely,

Chandra Jayaratne

cc. Prime Minister
Finance Minister
Speaker- For Circulation to the Constitutional Council,
Secretary, Monetary Board
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