News
Serious financial irregularities, lapses within Central Bank, State-owned Banks
The Auditor General (AG) in his Annual Report for last year has noted several serious financial irregularities and lapses in the State-owned banking institutions including the Central Bank of Sri Lanka (CBSL).
Among these was the CBSL’s purchase of property in Brazil for Rs 122.81 million in 2014, for its future operations. However, the CBSL had not obtained prior Cabinet approval to purchase this property, and the future plan for its utilisation had not been decided up to the end of the last year. Subsequently, this property had been rented out to the Foreign Affairs Ministry for a period of two years from February 1, 2015, with the Sri Lanka Embassy in Brazil housed in this premises since that date.
The CBSL had also acquired a building in New York for US$ 6,207,116 (Rs 607,121,953) on August 24, 2011, and rented it out to the Foreign Affairs Ministry for three years from June 1 2012, at a monthly rental of US$ 68,000, without being utilised for the intended purposes.
The AG noted in his Report that, according to Section 117 of the Monetary Law Act, “The CBSL should not engage in trade or otherwise have a direct interest in any commercial, industrial or other undertaking, except such interest as it may in any way acquire in the course of the satisfaction of any of its claims”.
In addition, the CBSL had paid Rs 1,396.22 million during the year under review, on behalf of the Government, to three Foreign Service providers for consultancy services, on a reimbursable basis from the Treasury. The said amount had been treated as a CBSL expenditure in 2014, without claiming it from the General Treasury. Further, it represented 68% of the total consultancy advisory professional service expenses amounting to Rs 2,050.62 million incurred during the year under review.
The CBSL had also entered into an agreement with a foreign company to establish an International Financial Centre in Sri Lanka. According to the agreement, the first installment of US$ 250,000 had been paid in October 2014. Thereafter, the CBSL decided to suspend the company’s services, without recovering the above amount.
The AG also referred to the opening of the Bank of Ceylon Seychelles Branch, and noted that deposits of three major customers amounted to 62% of the total deposits and 10 major deposits of customers, amounted to 77% of the total deposits of the Branch as at April 30, 2015.
“This indicates that the Branch was more dependent on very limited depositors, and exposed to high liquidity risk, which would adversely affect the Branch,” the Report said. The AG also noted that direct recruitment of management trainees to the Bank had been done in an irregular manner. He said that, despite the fact that the second written examination for the above recruitment had to be conducted by the Examinations Department of Sri Lanka, as per Board paper of October 3, 2013, it had been accomplished utilising a private institution which operates private tuition classes, with no experience in conducting examinations.The Report added that the Assistant General Manager (AGM)- Training & Development, had submitted wrong information to mislead higher management, and the daughter of this said AGM who had conducted all recruitment, had his daughter recruited without being appraised by the higher management. “Accordingly, the impartiality of the situation under these circumstances is questionable”.
The 2014 Annual Report was presented to Parliament recently.