Transparency International Sri Lanka (TISL) is urging the government to appoint a Banking and Finance Commission to address short term and medium term measures needed for macro economic and financial stability.
In a recent letter to the President, TISL Executive Director J.C. Weliamuna proposed an outline for the Commission’s Terms of Reference which includes coming up with strategies and measures to ensure sustainable, affordable and easy access to credit for prioritized sectors and enterprise segments including small and medium businesses and pro poor growth oriented micro credit.
The Commission should also address the urgent need for market regulators to be independent, act collectively with intellectual integrity and have the required knowledge, skills and attitudes. One of the Commission’s priorities is to ensure that governance and regulatory frameworks are strengthened to reduce the changes of re-occurrence of similar risks in the future amongst other issues.
The letter stated that TISL commends the government for undertaking the daunting task of delivering sustainable and equitable economic growth and prosperity to the Sri Lankan people, post war, terrorism and ethnic conflict. At this time, TISL feels it is essential that the banking and finance sector of Sri Lanka stands capable, stable and solvent. Resources should be endowed to support the action strategies to be implemented by the government in partnership with the formal and informal private sector including small, medium and micro enterprises.
The letter further stated that in the current context of the global economic and financial crisis and signs of financial instability with a few significant corporate collapses in Sri Lanka, the government has already taken some steps towards arresting possible instability in the local financial markets. While these strategies would stimulate sustainable economic activity, there is a need to have in place additional risk mitigation measures to achieve the goals set by the government. TISL, along with some leading members of the private sector, professionals, academia, media and civil society have initiated a collective process, to support the initiatives of the government by examining the potential risks and gaps in the banking and finance sector.
A recent TISL Roundtable discussion highlighted the differences between Sri Lanka and India in public responses and reactions to corporate fraud. Partner at PricewaterhouseCoopers (PwC) Sujeewa Mudalige said after the Sakvithi and Golden Key scandals, there have been no responses from the business community or the politicians as well as a lack of coverage in electronic and print media. Mr. Mudalige pointed out that following the Satyam fraud in India, even business competitors were on television speaking out against the company.
A member of a shareholder association pointed out that fraud is also being perpetrated in several companies listed on the Colombo Stock Exchange (CSE) and that Central Bank (CB) regulations are inadequate. Someone else pointed out that the CB cannot wash its hands completely of the Golden Key debacle by simply stating that these were unregistered institutions. He said if Golden Key, an unregistered money taking institution took Rs.26 billion in public funds, there are numerous other unregistered institutions who are taking large sums of money without any accountability or governance.
Some of the key issues identified at the Roundtable discussion were the need to develop a set of recommendations and improved regulatory control measures as well as legal and regulatory reforms to mitigate risks of significant corporate collapses in the banking and financial services sector and to ensure effective regulation of deposit taking institutions. |
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