‘PTL exposed primary dealer system at excessive risk’, CB report says
View(s):A new report on controversial bond trader Perpetual Treasuries Ltd (PTL) reveals some key financials showing a phenomenal rise like post-tax profits surging to Rs.6.12 billion from Rs. 713 million within 19 months while its capital base rose to Rs.11.07 billion from Rs. 1 billion in the same period. While PTL’s capital base was reported at Rs 11.07 billion as at May 31, 2016, the capital base of other five primary dealers put together was only Rs. 8.27 billion, the report titled “Perpetual Treasuries Ltd – Findings of the on-site examination” has said. The report at one point, noted:
It is observed that a standalone company like PTL has exposed itself and the primary dealer system as a whole to excessive risk by bidding excessively without a contingency funding arrangement. ” It said from April 1 to 8, 2016, of the Rs. 89 billion borrowed by all primary dealers, PTL had taken Rs. 66 billion (75 per cent of the total). The probe was started by the Public Debt Department of the Central Bank (CB) in November 2015 and subsequently transferred to the Supervision of Non-Bank Financial Institutions (SNBFI) as primary dealers were brought under the purview of this department. The SNBFI report was last week leaked to the media and appeared on many websites.
The last paragraph of the examination said: “The report of the on-site examination of PTL is hereby submitted for the consideration of the MB and approval of the MB is sought …” with the titles of four officials – DGSM (P. Samarasiri, Deputy Governor), SMB (H.A. Karunaratna, Assistant Governor & Secretary to the Monetary Board), AGJ (R.A.A. Jayalath, Assistant Governor) and D/SNBFI (U.P. Alawattage, Director – Supervision of Non-Bank Financial Institutions) and space for their signatures provided. What was leaked didn’t contain the signatures of these officials. On Wednesday, CB Governor Dr. Indrajith Coomaraswamy said he had received a copy of the report and was studying it before making any decision.
He was responding to a question by Business Times senior writer Bandula Sirimanna who is in Washington to cover the annual IMF/World Bank meetings in which the Governor is also a participant. The BT’s examination of PTL results and sharp disparity when comparing it with those in the market was also reflected in the SNBFI report which said that “PTL’s ROA (Return on Assets) and ROE (Return on Equity) have outperformed industry averages indicating an unusually high growth”. The call for an internal probe came from the Committee on Public Enterprises (COPE) to the Governor of the Central Bank and the Secretary to the Ministry of National Policies and Economic Affairs for a comprehensive report in August this year.