News
EPF, BoC, Central Bank proxies for Perpetual’s alleged Bond scam: COPE
The Employees Provident Fund (EPF) purchased Treasury Bonds (TB) from the Secondary Market at a cost of over Rs. 2.36 billion from the controversial Primary Dealer (PD), Perpetual Treasuries Ltd (PTL), the face value of which was Rs 2 billion, according to documents contained in the detailed report of the Parliamentary oversight body, the Committee on Public Enterprises (COPE).
The EPF purchased the TBs on 11.06.2015, just four months after the TB issue of February 27, 2015, which subsequently, became the subject of intense scrutiny over allegations that PTL was privy to insider information relating to the issue.
According to the information sheet on the EPF’s investment in TBs, submitted to the COPE, the EPF also purchased from three other PDs between February and June that year, but the investments were comparatively small.
The EPF functions under the supervision of the Central Bank (CB), and has the capacity to purchase TBs from the primary auction but, purchased comparatively lower amount of TBs from the primary market which has a greater yield. Hence, missed the opportunity of gaining the financial benefits due to the purchase from the secondary market with a lower yield, COPE said in its main Report.
More details have also come to light regarding the behaviour of Bank of Ceylon (BoC) at the auction of TBs in February 2015, where the BoC has offered three bids at the rates of 12.50%, 12.75% and 13% up to Rs 13 billion on behalf of PTL. It was disclosed at the COPE investigations that, this has been the first instance where one PD has offered bids for CB TBs on behalf of another PD. There is
no prohibition for a PD to place a bid on behalf of another PD.
These details have emerged in the report submitted by Ernst & Young, Chartered Accountants, who performed an Agreed Upon Procedure Engagement on the PD Unit (PDU) of the BoC.
For the period, January 1, 2015 to March 31, 2015, the BoC’s PDU had bid in all seven primary auctions for TBs conducted by the CB during the period.
“Out of the seven auctions, bids placed at six of the auctions were within the range of 10% to 13.15% of the auction value advertised by the CB. At the auction held on February 27, 2015, BoC placed bids 1,350 times higher than the CB advertised auction value,” the Report said.
“At the auction held on 02.27.2015, BoC did not place any bids on its behalf, and placed bids on account of another PD, Perpetual Securities Ltd for Rs 13 billion, and other customers for Rs 508 million, without considering BoC’s exposure to credit, market and liquidity risks,” the Report said.
Thirteen volumes of all COPE proceedings that looked into the financial irregularities which occurred in the issue of TBs, containing all the evidence gathered by it, was printed and distributed among MPs on Friday.