Monetary Law Act and future CB Chief

By Legal Eye

The press release issued by the Central Bank recently, quoted below for easy reference, poses a legal issue regarding the appointment of a Governor to the Central Bank who, in accordance with the provisions of the Monetary Law Act, is the Chairman of the Monetary Board.

“The Governor of the Central Bank of Sri Lanka Arjuna Mahendran informed the Monetary Board at its meeting held on Friday, 24 June 2016, that he would not be seeking re-appointment as Governor of the Central Bank of Sri Lanka when his term finishes on Thursday, 30 June 2016, until the Parliamentary Committee on Public Enterprises makes its findings known on issues related to the issuance of Treasury Bonds in the years 2015 and 2016.”

In accordance with the provisions of Section 13 of the Monetary Law Act the term of office of the Governor, shall be the period of six years commencing on the date of his appointment: and that in the event of the vacation of office by the Governor, before the expiration of his term of office, another person shall be appointed in his place to hold office during the unexpired part of the term of office of the Governor. 

The term of office of the present Governor, Arjuna Mahendran which was the balance period of the term of six years expires on 30 June 2016 and consequently in terms of Section “12. (1) of the Monetary Law Act the President is statutorily required to appoint a Governor on  the recommendation of the Minister in charge of the subject of Finance immediately after the end of this month.”

If a Governor of the Central Bank is not appointed on the first of July there is no provision in the Monetary Law Act for an acting Governor to be appointed. The provisions of Section 24 quoted below for easy reference, envisages the appointment of a Deputy Governor to act only when the Governor is temporary unable to discharge his duties.

“24. In the event of the temporary absence from duty of the Governor or of the temporary inability of the Governor to perform his functions and duties, the Deputy Governor designated as senior by the board shall act as the chief executive officer of the Central Bank and shall have authority to execute the powers and perform the functions and duties of the Governor under this Act.”

Monetary Board is a statutory body and it cannot legally function in the absence of a properly constituted Board comprising of a Governor appointed in terms of Section 12 quoted above.

A new Governor appointed would be entitled to continue for a period of six years under the MLA.