By Jayasri Priyalal –

Jayasri Priyalal

Issues get dramatized over facts often in news story lines. Insider information is valuable stuff similar to inside deals done in stock and bond exchanges for speculative gains through a commercial transaction. Many such stories were dominating in print and electronic media starting from the Central Bank Bond scam to the recent unfolding of the tender irregularity in People’s Bank in Sri Lanka.

Such stories get twisted according to the power and influence of the actors involved to the issue and the case in connection. Freedom of expression underpinned in unbiased media freedom built on the principles of judicial independence is the ultimate dispute resolution framework available in any free and democratic societies to unearth truth.

Sri Lankans are generally good in finding problems in solutions, instead finding the right solutions for a problem. Peoples’ Bank’s advertisement that appeared in newspapers, explaining the banks position other than one newspaper group which unravelled scam is now debated in the parliament. Ideally, Peoples’ Bank should have clarified the position in a press release yet they opted to insert advertisements.

Banks are in trouble because they failed in their financial intermediation role badly, by not channelling credits to the areas that deserve investment to stimulate growth in the real economy. Instead banks opted to direct investments towards real estates, commodities to make quick gains in the low interest regimes.

In Sri Lanka, in the recent past banks have being engaged in many other businesses other than banking. Some of them are conducting lotteries, pawning, leasing and travel agencies. Short term profit motives guided the banks direction and they completely neglected the customer needs. As the banks failed to “Stick to the Knitting” the other businesses such as supper markets, mobile telecommunication companies and other non-banking entities grabbed the business opportunities of banks. If one refers to famous Michael Porters competitive advantage theory, banks never imagine of a threat of substitute, and were too comfortable with high entry barriers. In the ever expanding on demand digital economy, traditional agents and principle’s business relationship does not hold tight.

Having ignored the risk conscious, customer focused business models the banks too were gambling in speculative business. Sri Lanka pioneered the nationalisation of banks by setting up of Peoples’ Bank in 1961, even before India. Nationalisation of banks in India started in 1969. People’s Bank was created to strengthen the live wires, the producers in the real economy the artisans, farmers and fishermen. Cooperative movement provided the 50% of the initial share capital of Peoples Bank. Today the bank is ready to take risks in oil hedging instead providing seed capital for a farmer or a fisherman to purchase a tractor or a fishing boat. For all such requirements banks encourage the producer to seek finances through leasing or pawning at exorbitant interest rates. Credit appraisals and taking risks on behalf of the producers in the real economy is no more a priority for commercial banks and seen as a burden. The banks were created to ease the burdens of debt of these vulnerable groups from the clutches money lenders and pawn brokers in the past, but now banks are taking a reverse trend they give up banking and take up pawning.

The new business model of banking is now over dependent on advertising and marketing. The business of banking is built on trust, but business of advertising is built on mere perceptions. Banking and finance is a professional service and marketing that service through deceptions and twisted perceptions is unethical. Regulators need to review this unhealthy trend to bring back banking to its core business. If not banking too will be UBERIZED in on demand digital economy.

This writer emphasized the importance of act of Whistleblowing in the article published in the Island on 4th November 2015. Right to information and whistleblower protection need to be formalised to uphold good governance is all institutions in Sri Lanka. Otherwise the chances of messenger getting killed as a consequence of the message as happened in People’s Bank’s tender scam can become the norm, as the power balance and symbiotic relations between the banks and the advertising agencies are strong.

It may be worthwhile to recall that one of the finance industry publication rated gave an award to “Lehman Brothers” as the most innovative financial institution in New York in 2007, just a year before its collapse in 2008.

*Writer is the Regional Director responsible for finance sector activities of UNI Global Union’s Asia & Pacific Regional Organization in Singapore. Former banker with 25 years of banking experiences working in Indian Bank Colombo. Who was also elected as Senior Vice President of Ceylon Bank Employees’ Union.