Controversial Treasury Bond issue:
Credibility of market at stake
The controversial Treasury Bond issued by Central Bank Governor
Arjuna Mahendran has caused a major scandal and tarnished the image of
the Government which came into power to bring about good governance,
according to public opinion.
The blatant act of the Governor has sparked widespread criticism
across the country for setting a bad precedent under good governance
while holding a noble position in an institution held in esteem for
decades. Banking experts said that the crux of the matter is not whether
the act was committed intentionally or not but rather the embarrassment
it has caused to the prestigious institution and the ill-fame it has
brought on the Government which is on a hunt to nab fraudsters of the
Former Chairman, Hatton National Bank and present Chairman, Osara
Lanka Destinations, Rienzie Wijetilleke said that while Raj Rajaratnam
is serving a 15-year jail term in the USA for insider trading which is
apparently a lesser offence than someone within an organisation aiding
and abetting people close to him with information to commit the same
He said the investigation should have been handed over to qualified
people. It should be carried out by independent people with a sound
knowledge of insider trading.
"There are quite a few of retired people from the Central Bank and
commercial banks who can investigate. The credibility of the whole
market is at stake from an outside point of view,” Wijetilleke said.
He said the after-effects will be felt in the weeks and months to
come and it will affect medium-term economic issues which the Government
is tackling due to the wasteful and corrupt practices and misuse of
power by the former administration.
The previous Head of State developed arrogance during the last couple
of years and showed sheer indifference to public opinion and the
numerous wrong doings and malpractices by those close to him.
"We saw how Ministers and MPs at that time showed arrogance and
stubbornness when the Opposition criticised them in Parliament.
It is unfortunate that today those who have got into governing
positions through the mandate received by President Maithripala Sirisena
are displaying utter arrogance," he said. “It was heartening to see
prominent leaders of the present Opposition demonstrating outside the
Central Bank on the bond issue.
After many years we have experienced a lively Opposition to the
Government's acts which we rarely witnessed when the previous government
was in power mainly due to the weak and inactive opposition leadership
during that time,” Wijetilleke said.
He said it was amusing to see the very same politicians who were in
power at that time and were mere spectators when the monitoring
authorities at that time ruined this institution, demonstrating outside
the Central Bank.
Their silence and failure to control these unhealthy policies and
actions of the then Government was inexcusable. The Central Bank at that
time was run by a ‘one man decision maker’ who blindly followed orders
and requests of his boss.
“This is why I say the recent show of the Opposition against the
Governor of the Central Bank was a ‘big bluff’, Wijetilleke said.
Nithya Partners Precedent Partner Aritha Wikramanayake said that as a
result of the controversial transaction, good governance promoted by the
Government has drowned out. “People want good governance and that's the
reason why they elected this government to power. There is something
really wrong when one looks at the whole bond issue. The Governor has to
step down if he has committed a grave mistake," he said." He must
relinquish his post for embarrassing the Government. This is not a
matter of taking disciplinary action but rather he should bow out,”
Wikramanayake said. Wikramanayake said that the public does not accept
the credentials of the three-member committee appointed by the Prime
Minister Ranil Wickremesinghe to investigate the transaction and as a
result the outcome of the investigation will not be recognised. The
public will question the credibility of the investigation.
“The committee should be composed of people with stature and
financial expertise. If not it will undermine the credibility of the
findings. No amount of investigation by this committee will be of any
All the good things the Government does in the future will be
clouded. The bond issue will surface over and again,” he said. The
Opposition vehemently criticised the committee comprising lawyers who
are loyal to the United National Party.
The JVP also called for the resignation of the Governor until the
probe on the alleged deal is completed.
“Mahendran put himself into trouble by not following proper
procedures. He allowed his son-in law to have an upper hand in the
transaction. He should accept the mistake and quit,” Wikramanayake said.
The Governor came under fire for allowing his son-in-law to dominate the
bids and gain large profits. Mahendran said he takes responsibility for
not informing primary dealers regarding the latest treasury bond issue
of the Central Bank. He agreed that there was a communication gap
between the Central Bank and primary dealers on the bond issue and
denied any insider trading. “A code of conduct for the Central Bank
should be brought in and a proper course of action must be ensured to
avert the recurrence of such incidents,” Wikramanayake said.
Mahendran was accused of blatant abuse of power when the rates of
Treasury Bonds that opened on February 27 through which Rs. 1 billion
was offered, was jacked up.
The allegation was that although the rates of the Bonds were expected
to be in the range of 9.5 percent it had been escalated up to 12.5
percent under the instructions of Mahendran.
Media reports claim his son-in-law was fully aware of this step and
as a result, managed to gain a huge profit by bidding at the renewed