Central Bank to exit EPF
The Government is in the process of changing crony directors installed by the previous regime in several banks, and plans to separate the functions of the Employees Provident Fund (EPF) from the Central Bank (CB), a state Minister says.
Policy Planning and Economic Affairs Deputy Minister Dr. Harsha de Silva told the Business Times that it is ‘incestuous’ for the CB to trade in shares held by the EPF. “This incestuous relationship must end and we will take the EPF away from the CB,” he said. The deputy minister said with such a move situations where financial institutions were controlled according to the whims and fancies of political masters will not arise.
After parliamentary elections, the new Government will start major reforms in the financial services sector, he said. “We will amend the Monetary Act and the Banking Act to ensure the independence of the CB while separating its core functions.” He added that former HNB chairperson
Ranee Jayamaha did the ‘right thing’ by stepping down and charged that others (cronies of the last regime) should follow suit. He added that a majority of directors (in private banks) are good and it’s the bad apples that the government is worried about.
A senior industry official said that planned changes in the boards of some of the banks may take place this month and that the Policy Planning and Economic Affairs Ministry through state-owned entities which are shareholders of these banks plan to recommend certain chairmen to them. Dr. de Silva confirmed this when he said, “We will certainly clean up the mess. We’ll remove this disgusting control that CB has had from the commercial banks.”
When the Business Times pointed out that the government would be using the same powers that they had criticised (when in opposition) in taking control of these banks (using EPF to nominate directors), he said, “We need to come out from the same well that we were made to get into.”
He was adamant that bank boards should be clean. “In the medium term we are keen to revert to the former status quo where normal procedures were adapted when appointing directors to the boards as in the case of other public-listed companies,” he added.
“We can’t tolerate convicted criminals on these boards. We need to use the same method to get out from this mess,” he said.
The Sunday Times last week exclusively reported that sweeping changes are set to take place on the boards of six Sri Lankan private commercial banks in which the Government has a stake, triggering concern across the banking sector.