By Sarath de Alwis –
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” – Adam Smith, Wealth of Nations
Things have not changed much since Adam Smith wrote the Wealth of Nations. We have a scandal tainted past. We cannot erase it. But we can put it right. Therefore we should insist that Mr. Ranil Wickremesinghe take responsibility for the scandal that has undermined the credibility of the reform agenda of President Maithrpala Sirisena.
Corruption in Central Banks is nothing new. It has happened in our Central Bank and in other Central Banks.
Experts and Scholars are on record that “corruption flourishes where agents have monopoly power plus discretion and where accountability is weak”
Our Central Bank has had the malaise for nearly a decade. It began with President Mahinda Rajapaksa appointing his own Governor. The aberration was made a tradition by Prime Minister Wickremesinghe who filled the position with his own nominee. The hands on and go getter Prime Minister has got his hands dirty in the first hundred days.
The recent bond deal involves the Bank of Ceylon – the nation’s premier state owned bank. In lightning speed, the Bank of Ceylon, headed by a senior Lawyer and UNP working committee member seems to have approved a credit line of Rs. 3 billion to the Primary Dealer whose bid was accepted by the Central Bank’s Treasury Bond Tender Committee.
Unless the new Governor had changed the composition of the Tender Committee its member ship includes several high ranking officials in addition to the Deputy Governor and the Additional Superintendent of Public debt. They are the Director of Economic Research, the Assistant Governor in charge of Public Debt, Director of Domestic Operations and the Superintendent of Public Debt as the Secretary of the Tender Committee. Transparency and Good Governance commenced with the swearing in of President Maithripala Sirisena on 9th January at Independence square.
Why did the Bank of Ceylon adopt the highly unusual practice of submitting a bid for a primary dealer? The primary dealer is supposed to submit bids on its own.
When truth is buried underground it grows, it chokes, it gathers such as explosive force that on the day it bursts out it blows up everything with it.
Before recommending others to read or watch ‘Citizen Kane’ the Prime Minister should read Emile Zola.
This undoubtedly is a scandal of epic proportions. The tender committee minutes have been leaked to media. It is a healthy sign of the presence of conscientious whistle blowers within the monetary authority.
The pompous posturing and capricious complaints by the Prime Minister Ranil Wickremesinghe in Parliament on Monday had a laser sharp focus and one primary purpose. He wanted to insulate the UNP working committee member Ronald Perera PC and Chairman of Bank of Ceylon from the radiation of the scandal.
The contrived credentials of the three mediocre lawyers appointed to report on the matter fail to hide the pivotal reason for their selection – their party allegiance and pliability.
Claiming to provide the background to the events, the Prime Minister studiously avoided any reference to the glaringly obvious link between the Primary Dealer and Bank of Ceylon. Free with names of people he wished to target he avoided the Bank of Ceylon, Perpetual Treasuries and their respective senior decision makers. He failed to mention that UNP chairman Malik Samarawickrema had also been present when the three member probe committee was appointed, a point publicly made by UPFA parliamentarians. Cavalier in naming bankers and brokers in high finance he was meticulously meagre with the details of the Bank of Ceylon link to the successful bid now under the spotlight.
The Prime Minister who claimed that he was not deaf, dumb or blind to the facts did not explain that the transaction included the Perpetual Treasuries bid of 2 billion directly and 3 billion through the Bank of Ceylon. This vital fact was not on his radar when he delivered his homily on bond trading in Parliament.
The primary dealer is supposed to submit bids on its own. That it was done in collaboration with the country’s premier state owned bank is unusual and inexplicable.
In this instance what has happened is that the primary dealer may not have had the funds to support its bid. Therefore the primary dealer had a credit line arranged with the Bank of Ceylon for Rs. 3 Billion.
This is not a privilege available to the ‘Maha Janaya’ whom the Prime Minster assured were his masters. The question arises weather the three lawyers of impeccable integrity will investigate whether the Bank of Ceylon conducted a credit appraisal before it approved the credit line for Perpetual Treasuries the primary dealer.
That may involve the three lawyers interviewing the Chairman of the Bank who should have been on the loop for a transaction of this magnitude. Now come the most interesting part. The bids have to be paid by the successful primary dealer immediately. The credit line from the Bank of Ceylon should have been approved in less than five minutes! Now that is ‘Avant-garde’ banking for you.
Up to the year 1970 Governance was a mixture of both good and bad. It was rarely ugly. The following episode has great relevance to the present day.
Parliament was debating a no confidence motion brought against Mr.M.H.Mohamed who was the Minister of Labour. Prime Minister Dudley Senanayake who wouldn’t or couldn’t say boo to a goose or utter a falsehood with a straight face defended his Minister. With characteristic candour he declared that he would give his Minister the benefit of the doubt. Dr. Colvin R De Silva who followed told Mr. Mohamed reassured the besieged Minister Mohamed. He did not expect him to resign. ‘In this country Ministers do not resign. Instead they resign themselves to the new situation! The episode has a moral in resolving the muddied muddle of Bonds. The dollar stops at the door step of the Prime Minister.