Financial institution collapse creates depositor doubt

Wednesday, 4 March 2015 00:00 - - {{hitsCtrl.values.hits}}

Distraught depositors of CIFL protest in Colombo yesterday demanding immediate relief - Pic by Shehan Gunasekera By Ashwin Hemmathagama Our Lobby Correspondent The collapse of financial institutions during the recent past has created doubt in the minds of depositors “questioning the role of the regulator” which has “failed in its duty on several occasions”, CIFL depositors said yesterday. The depositors made these comments, which blamed the regulator and implored the Government to expedite the compensation program, while staging a demonstration along Parliament Road. The CIFL depositor’s grievances were voiced in the House by Opposition lawmaker Anura Dissanayake, who accused the Government of failing to apprehend the culprits and reveal preventive measures now in place. MP Dissanayake demanded the Government to reveal the steps it had taken to compensate the 4,159 depositors. He also suggested that the Government take legal action against the officers at the Central Bank who are believed to be involved in this fraud and to change regulation to restore public trust. “By the time it collapsed in 2013 due to mismanagement and wrongful reinvestment, CIFL was a fully-fledged financial service provider. Since 2006 there were signs but the Central Bank of Sri Lanka did not take preventive action. Instead of taking preventive action they supported it to continue. The tension increased in February 2013 when CIFL failed to pay the interest due to the depositors. As a result the Central Bank brought Rosko Melani, an investor, to resurrect CIFL. The owners of CIFL and Touchwood were the same. Instead of making any payments, the owner left the country. Later it was learnt that he was an international smuggler. So now the CIFL depositors are in a desperate situation,” explained MP Dissanayake. In response, Finance Minister Ravi Karunanayake promised good governance. “We met the investor. The protection expected was not provided simply because the former Governor of the Central Bank made it more politicised. I discussed these matters with current Governor Arjuna Mahendran. Starting from 1 March all investments will be protected if the Central Bank provides a guarantee. We have also increased interest rates. Out of all Central Bank employees one Mrs. Thambugala was involved in this. Before the end of this month KPMG will complete the audit,” said Minister Karunanayake, who criticised the practice by the management of CIFL of using photographs of President Rajapaksa to raise funds and allowing the former CBSL Governor to address promotional campaigns.