Decision to re-appoint Arjuna lies in President’s hands
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Will the Central Bank (CB) Governor Arjuna Mahendran be re-appointed for a new term when his current term expires on June 30th? This is the question uppermost in the minds of many in Colombo’s political, business and social circles. Though former Governor Nivard Cabraal’s tenure of office courted lot of controversy and questionable deals some of which are now before the Financial Crimes Investigation Division (FCID), for the first time in the history of the banking regulator has the appointment or re-appointment stirred so much attention, discussion and debate.
Mr. Mahendran’s tenure, midway of Mr. Cabraal’s term of office, has been mired in accusations that Perpetual Treasuries Ltd, a firm owned by the family of the Governor’s son-in-law Arjun Aloysius, was privy to inside information in the issue of Treasury bonds and bills.
The Governor has vigorously denied any wrongdoing on his part. The Joint Opposition and good governance activist Chandra Jayaratne are urging the President not to re-appoint Mr. Mahendran for a new 6-year term. Also protesting is the 4000-strong Standard Credit and Finance Co Deposit Protection Society. The society which is still to get a convincing response from the Central Bank on the return of their deposits from the failed finance company recently filed a complaint in the Human Rights Commission (HRC) against the Governor. The HRC has asked the Governor to submit a response to the complaint on or before June 6. Government sources said Prime Minister Ranil Wickremesinghe and President Maithripala Sirisena share opposing views on Mr. Mahendran’s performance.
The President is not in favour of a re-appointment owing to the allegations on bond issues while the PM’s team is seen pushing for Mr. Mahendran’s continuation on the grounds that he is part of a unit that would resurrect the cash-strapped economy in two years. Other names are being thrown around as possible aspirants for the post but the President is yet to make his decision known on whether or not Mr. Mahendran would continue. Under the Monetary Law Act, the President appoints the Governor on the recommendations of “the Minister in charge of the subject of Finance”. However the CB and its functions have been brought under the Ministry of National Policy and Economic Affairs headed by Prime Minister Ranil Wickremesinghe under a September 21, 2015 gazette notification by order of the President, formalizing a process whereby the PM oversees the bank and not the Finance Minister.
The change made in the allocation of subjects and organization last year was a departure from the practice of the bank coming under the Minister of Finance, raising questions on the legally of this move. However legal experts say that there was no legal impediment since the subject, organization and the statute (Monetary Law) was assigned to the Prime Minister’s ministry by the President. Apart from the CB, some other functions of the Finance Ministry like exchange control and economic policy have also been assigned to the PM. The departure of these norms has led to confusion, delays, uncertainty and duplication of work in both ministries, government sources said. In the meantime the anti-Mahendran group argues that the President must select a ‘fit and proper’ person who is of ‘unquestionable integrity’ as Governor.
They say that the current Governor is tainted with accusations and is still to be cleared of any wrongdoing by the Committee on Public Enterprises (COPE) in an ongoing investigation on the questionable February 2015 Treasury bond issue. Pro-Mahendran supporters say that there is nothing in the Monetary Law Act that talks of moral issues, etc and that an appointment is made on the recommendation of the Minister “in charge of the subject of finance”. The only time when ‘immorality’ figures is when the President in consultation with the Minister can sack the Governor or any member of the Monetary Board “if he has done any act or thing which, in the opinion of the President is of a fraudulent or illegal character or is manifestly opposed to the objects and interests of the Central Bank.”
Former Governor Cabraal resigned in January 2015 after a new government was elected. As per CB rules, a new Governor’s term is only effective for the rest of the term and thereafter must be re-appointed or a new appointment made. Mr. Cabraal was also appointed midway of another Governor’s term, and then re-appointed (on June 17, 2010). The then Governor Sunil Mendis resigned with effect from June 2006 after two years in the 6-year term. He had been appointed by then President Chandrika Kumaratunga and resigned after Mahinda Rajapaksa won power.
There have been 13 governors so far inclusive of John Exter, the country’s first Governor who served from 1950 to 1953. His successor, N.U. Jayewardene perhaps served the shortest ever term of one year (1953-54) while all the others have served longer periods though short of six years, in some cases. If Mr. Mahendran is not re-appointed, his term would have been the second shortest in history.
| Central Bank looking to clean its image?Seeking to enhance its reputation and work amongst the Sri Lankan public, the Central Bank (CB) has announced a tender to select a public relations company to launch a year-long promotion campaign. It has invited “Expression of interest (EOI)” proposals for the provision of services of a publicity services provider for the banking regulator. The notice posted on the CB website by the bank’s Director, Communications Department said the deadline for presenting EOI’s and other information is tomorrow, June 6.
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| Monetary Board breaks silence on bond issues | |
| The Monetary Board after weeks of silence and pursuant to a public outcry over Treasury bond issues, on Thursday recommended new guidelines to make auctions more transparent. Money market analysts said that it was intriguing that the board was breaking its silence and allowing transparency just as the governor’s term was coming to an end. “Is this to back the Governor’s re-appointment bid?” one analyst asked. The board recommended the holding of pre-bid meetings with all the primary dealers to share information on market developments and to have a clearly defined auction calendar; that international best practices be examined with respect to volumes advertised and accepted at public auctions, and propose to the board as to how the CB should adopt such practices. It also said the Employees Provident Fund (EPF) should actively participate at the primary auctions, in response to allegations earlier that the EPF was deliberately buying in the secondary market from ‘favoured’ dealers and making losses in the process. |