Treasury Secretary spells out ill effects in bailing out failing financial institutions
A top Treasury official says the government should not bail out failing financial institutions, as it has to be borne by the tax payer’s money.
This comment was made by Dr R H S Samarathunga, Secretary to the Treasury and Ministry of Finance, when he addressed the 20th Convocation of the Institute of Bankers of Sri Lanka held at the BMICH last week. He pointed out that banking and finance business is very lucrative, where these institutions are housed in high rise buildings and employment in these institutions are highly prosperous. However he stressed that all those involved in this sector have to be mindful that higher the risk, higher the reward and If the risk failed to bring results then it is not the government that should face the failed risk, but the risk takers and all the stakeholders.
He said that when the risk taker loses then the public will have to be prepared to dole out the failed risk by paying additional taxes. Going by the best known international norms and practices, he noted that the government’s responsibility is to safeguard the banking and financial system and not each and every individual. Therefore, he warned that all stakeholders in the finance business must be mindful of managing risks in all financial transactions. He said that this country has been talking of good governance for several decades, but opined that good governance is managing finances in the country without fraud. He said that these financial institutions must be mindful that all stakeholders including investors, board of directors, managers, employees, professionals, regulators, law makers, and law enforcement authorities should play their role properly.
Those stakeholders will have to be responsible in maintaining the financial system stable and their role is a public role concerning the public in general he said adding that it is a very responsible thing because it involves money”. Central Bank Governor Arjuna Mahendran who was the Chief Guest at the ceremony, enumerated the duties and the responsibilities of the Central Bank and how it manages the country’s economy and finances. P Somasiri, Chairman, IBSL and Deputy Governor, Central Bank welcoming the participants said that at present IBSL conducts several in-house training programmes/events to meet the growing needs of the professional training and qualifications. He said that their total membership today stands at 31,500 consisting of nearly 26,000 student members.