Sri Lanka’s PABC in ‘significant manipulations’ of bond market: CB

ECONOMYNEXT – Sri Lanka’s Pan Asian Banking Corporation Plc, had engaged in the face of it "caused significant manipulations in the Government Securities market," the central bank said following a report by a Presidential Commission into securities scams in 2015 and 2016.

"Investigations are ongoing in this respect and further action will be taken based on the outcome," the central bank said.

The report of the commission had been sent to the Central Bank on January 10 by President Maithripala Sirisena. It had a series of recommendations for the central bank. Actions had been taken or initiated on several of them, the central bank said.

Following initial inquiries the governing Monetary Board of the Central Bank has already suspended the business activities of government securities dealership of the PABC for six months from August 2017, the central bank said.

Evidence presented before a President commission of inquiry into rigged auctions and securities scams suggested that PABC executed orders pre-arranged between Perpetual Treasuries and a dealer at the Employees Provident Fund managed by the central bank and other state funds.

Richard Benedict Dias, head of PABC Bank’s Treasury told the inquiry that billions of rupees of bonds were bought from Perpetual Treasuries, a firm connected to ex-Central Bank Governor Arjuna Mahendran’s son-in-law Arjun Aloysius, and re-sold to the Employment Provident Fund.

The bonds were bought by Saman Kumara, an official at the EPF, which is managed by the Central Bank, he said.

Dias said trades were also made with National Savings Bank and Sri Lanka Insurance Corporation, responding to questions by Commissioner Prasanna Jayawardene whether similar deals were made with other state entities.

Dias said he could not comment on the rates at which the deals were done on the instructions of Perpetual and did not examine the market to compare before carrying them out.

If SLIC bought the bonds, the onus was on the institution to do so, he said.





"We were told that SLIC had agreed to the rate," he said.

Dias said he could not recall whether any deals made with the NSB was made on the own initiative of PABC, outside of instructions received.

NSB had recruited a dealer recommended by the Central Bank from EPF called Naveen Anuradha following a request by Chairman Ashwin De Silva.

Anuradha had been appointed chief dealer despite the presence of an experienced dealer called Abeysinghe, consultant to Treasury operations Lionel told the commission.

Lionel refused to carry out his instruction and complained to higher authorities. Then his (Lionel’s) one billion rupee dealing limit had been withdrawn and he could not trade. Anuradha had claimed a relationship with a top politician.

PABC has started to do deals for Perpetual Treasuries at pre-arranged rates, following instructions from then the PABC chairman.

President Maithripala Sirisena said in a statement that the commission of inquiry had recommended that the then Chairman of PABC should be investigated further. (Colombo/Jan12/2018).

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