Hedging deal - no need to pay banks - Premajayantha

Petroleum Industries Minister Susil Premajayantha has re- affirmed that there was no need to pay banks on the hedging deal. He said that his statement on Friday has been misinterpreted and the government under no circumstances was obliged to pay any bank under the controversial hedging deal.

The minister's statement said that he has been misquoted in a recent article published by an English daily on January 21, 2011. The reporter raised a hypothetical question should the outcome of the cases be detrimental to the Ceylon Petroleum Corporation (CPC) what would be the course of action.

He said the arbitration panels in Singapore are yet to provide any of its opinions and the case in London is yet to commence. The hedging deal should have benefited both parties but it had been designed to benefit only the banks. There is evidence of various flaws to the deal and the Supreme Court and regulator of Sri Lanka has already expressed that the transactions are tainted and should be considered null and void.

In short it was a corrupt deal that requires investigation on the ethics of a few bankers engaged in promoting these transactions and the idea behind such origination.

Premajayantha said that though he is not personally involved in the litigation, the Attorney General's Department is defending the CPC and at every instance the two cases and tribunal action will be resisted. The tribunal case of Citi Bank is now waiting reserved judgement and that the Standard Chartered and Deutsche Bank cases have not even commenced.

The Attorney General's Department and appointed Counsel are fully committed to presenting CPC's position at the litigation brought by the banks and action is being taken to present the circumstances and facts supporting the CPC position.

Premajayantha said that there has been a basic flaw in the agreements that only benefited the banks and were speculative in nature. The deals were designed to profit only the banks. They were in violation of the Cabinet approval and not in line with the authority provided to the CPC. He said that transactions were in violation of the Central Bank regulations and action will be taken locally against the banks and officers involved in violation of the local regulations. No stone will be left un-turned in defending the CPC's position, in transactions that have been entered into by miss-selling products to officials of the CPC. He said that the deals were corrupt.

It was also learnt that the Central Bank of Sri Lanka would continue with the investigations on the banks that have been in violation of the regulations.