Releasing information on bond issues tantamount to endangering Lanka’s economy, CB says
View(s):The Central Bank (CB), despite pressure mounting on allegation of insider trading in Treasury bonds, has refused to release information on recent bond issues as it is bound by secrecy provisions. The request for access to information under the Constitution and the proposed Right to Information (RTI) bill was made by good governance activist Chandra Jayaratne. Mr. Jayaratne had said in a April 19 letter to the Monetary Board that the CB is bound to provide details of several bond issues and their ‘buyers’, among other details and that he, as a citizen, had a right to this information.
However the CB in a reply dated May 6, which Mr. Jayaratne forwarded to the media, said that the RTI is yet to be approved by parliament. “..in any event, we further wish to inform you that section 5 of the draft Bill permits refusal of access to information where the disclosure of such information would cause serious prejudice to the economy of Sri Lanka by disclosing prematurely decisions to change or continuing government economic or financial policies relating to, inter alia, the regulation of banking or credit,” the letter said. In the meantime, pressure is mounting on President Maithripala Sirisena to order a probe into alleging fixing of bond issues in recent times amidst growing public anger over the absence of a proper investigation, much like last year’s controversial bond issue.
“Something is happening in the market. We don’t have direct evidence to prove it but there is suspicion that one or two dealers are benefiting from inside information,” one primary market dealer, who requested anonymity, told the Business Times. At least two parties, including Mr. Jayaratne, have urged the President to order a probe before another scandal hits the already-tainted securities market in Sri Lanka which is losing confidence of investors. At the core of the complaints, is the issue of Treasury bonds amounting to Rs. 80 billion on March 29 this year, double the amount that was originally sought by the CB. The event is similar to the February 27, 2015 issue of Rs. 10 billion worth of bonds in which the son-in-law of CB Governor Arjuna Mahendran was accused of insider trading.
In that instance, a UNP-led committee found no fault with any dealer while a promised Parliamentary probe didn’t materialise. Suspicion still hangs in the air over that transaction while the accused-party Perpetual Treasuries continues to be an active participant in the market and facing further accusations in recent deals. The company has not responded to media inquiries. In the latest issue of bonds, the stark fact that the Employees Provident Fund (EPF) purchased bonds at a higher rate in the secondary market instead of cheaper access in the primary market as it is entitled to, stirred more accusations of impropriety between some market dealers and sections in the CB. The banking regulator has strenuously denied any alleged fixing of the rates or increased quantity.
“The Central Bank accepted bids at an average 14.2 per cent at the March 29 bond auction and two days later one or two dealers sold it at a huge profit to others including the EPF,” the unnamed dealer said, adding that lack of information about the names of dealers, the transacted amounts and at what interest rate is plaguing the market. Mr. Jayaratne on May 3 wrote to the President saying the ‘purported’ bad governance practices occurring in the issuance of long dated bonds by the Central Bank remains the biggest potential threat to the credibility of good governance by the government under the latter’s leadership. He said the CB’s Monetary Board did not actively investigate nor initiate necessary additional controls and process changes to reverse the several weaknesses pointed out by civil society advocates and professionals in the bond issue last year.
“Unfortunately, there is a strong public perception that long dated bond issues in 2016 are also riddled with continuing bad governance practices,” he said, citing ‘flaws’ in the issue of bonds this year on January 8, February 5, March 29 and March 31. “These include facilitation of interests of third parties via information leakages and questionable collusive transactions by managers in state-controlled entities,” he said. Similarly the Anti-Corruption Front (ACF), in a letter dated May 5, urged the President to appoint a Presidential Commission of Inquiry to be established with regards to looking into Treasury bonds issues. “It is most unfortunate that the Central Bank has hitherto been unable to convince the public regarding the transparency of the aforementioned two bonds issues,” it said.
“If the Central Bank is not going to reveal the information and details to the public and establish that the bonds had been done in the best interests of the State, as per the Constitution, the responsibility of intervening falls on the Executive President,” it said. Meanwhile the Committee on Public Enterprises (COPE) has requested the Auditor General to submit a report regarding all dealings done by the CB since January this year, officials said.