Sri Lanka’s Monetary Board which governs the Central Bank (CB), after weeks of silence and pursuant to a public outcry over questions raised on Treasury bond issues, on Thursday recommended new guidelines on the issue of bonds.
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.
The board 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.
Money market analysts said this is the first instance in recent months where the board has stepped in and accommodated some of the recommendations suggested by good governance activists like Chandra Jayaratne who, among others, called for more transparency in bond auctions. The allegations, this year and last year, have swirled around claims that Perpetual Treasuries Ltd, a firm connected to CB Governor Arjuna Mahendran’s son-in-law Arjun Aloysius was privy to inside information. The Governor, whose re-appointment is coming up this month, has vigorously denied any wrongdoing. Analysts also said that it was intriguing that the board was breaking its silence just as the governor's term was coming to an end. - ENDS -
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