Measures to re-appoint Mahendran as CB Governor under consideration
President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe and Central Bank Governor Arjuna Mahendran during a July 2015 event in Colombo. Mahendran's departure from the Central Bank this week has triggered a major political crisis.
Measures got underway this week as a section of the Government led by Prime Minister Ranil Wickremesinghe sought to retain under-fire Arjuna Mahendran as the Central Bank Governor, in the event of his clearance by the Parliamentary Committee on Public Enterprises (COPE) probe.
In this process, the authorities either knowingly or unknowingly violated provisions of the Monetary Law. For instance there is no acting provision and only the governor can call a Monetary Board meeting. However a meeting was called on Friday. Work has slowed down at the banking regulator over the developments while a list of transfers prepared by the outgoing Governor due to be announced in August has been suspended, official sources said.
The PM has said that three panels – a committee, the Supreme Court and the police – have cleared Mr. Mahendran while they have to await the verdict of COPE which has summoned the Governor on July 7 for the ongoing inquiry. COPE Chairman Sunil Handunnethi said the summons per tains to the position and not the former Governor. The Monetary Board held two emergency meetings this week with the second one on Friday, hours after Mr. Mahendran’s short 17-month term ended. The board is believed to have decided it will manage the affairs of the CB until an appointment is made, but there was no independent confirmation of this development.
While the board has authority under Section 8 to manage the affairs of the bank, holding a meeting on Friday is questionable since the law states that only the Governor can call a meeting, and on Friday the bank was sans its chief executive (governor). The games, a tag given by social media to the drama at the bank, began on Wednesday June 29 when the President announced in a morning ‘tweet’ that he would be appointing a new Governor within a couple of hours. In an unprecedented move, he visited the bank in the evening when the Prime Minister accompanied by Mr. Mahendran walked into the bank and a discussion ensued between the two leaders. The day ended without an announcement.
On Thursday, the outgoing Governor called an emergency meeting where it was stated that according to the Attorney General, an acting appointment can be made, even though the law doesn’t permit it. Then Mr. Mahendran proposed the name of Deputy Governor P. Samarasiri as acting Governor, drawing objections from Treasury Secretary R.H.S. Samaratunge who said the Monetary Law doesn’t permit for such a move when there is no Governor in place. No decision was taken at the meeting. In the drama, the CB pushed through an amendment to the money broking laws where brokers must inform the regulator soon after a transaction is concluded. This is in line with a recent MB statement recommending more transparency in bond deals.
The amendment stated that “An authorised money broking company shall upload information on each quote/bid provided to them by transacting parties and each transaction intermediated through a money broking company, not later than 30 minutes of such transaction through the on-line interface provided to such money broking companies by the Central Bank of Sri Lanka”. The issues at the CB were partly exacerbated by the institution last year coming under the purview of the PM’s ministry instead of the Finance Ministry as the practice has been. In the run-up to the June 20 deadline, various names surfaced as possible nominees for the post – Charitha Ratwatte, Dr. Lalith Samarakoon, Dr. Saman Kelegama, Dr. Nandalal Weerasinghe and Mr. Samarasiri.
However authoritative sources said that the PM’s nominee was Mr. Ratwatte. On Wednesday, the CB Executive Staff Officers Union sent a letter to the President listing out the procedure in appointing a new Governor and pointing out that a Deputy Governor cannot be appointed in an acting Governor position. Governance activists on Thursday warned at a media briefing that they would mobilise civil society and take to the streets if Mr. Mahendran is re-appointed. Some activists also called for a forensic audit by bribery commission authorities on bond transactions.