Monetary Board to hold special meeting on primary dealers

Tuesday, 11 October 2016 00:06 -     - {{hitsCtrl.values.hits}}

Discussions will include concerns linked to Perpetual Treasuries, police complaints filed on leaked report

The Monetary Board will hold a special meeting on the operations of primary dealers, including concerns linked to Perpetual Treasuries, over the next few days, the Central Bank said yesterday after it had complained to police on the leak of a confidential inquiry carried out on Perpetual Treasuries.  

“There has been widespread coverage in the press and electronic media regarding a report related to the examination of Perpetual Treasuries Ltd. conducted by the Central Bank of Sri Lanka as the regulator of Primary Dealers operating in the Government securities market,” the Central Bank said in a statement.  The Central Bank insisted the release of the report on Perpetual Treasuries into the public domain was not authorised, adding that the Central Bank of Sri Lanka’s internal processes within the Department of Supervision of Non-Bank Financial Institutions had not been completed and the final report had not as yet been submitted to the Monetary Board for its consideration. 

“Arising from this unauthorised disclosure, the Central Bank of Sri Lanka is strengthening its internal control mechanisms and a complaint has also been made to law enforcement authorities to inquire into the unauthorised release of this report.”

At its last meeting held on 3 October 2016, the Monetary Board decided to hold a special meeting to consider issues related to the resolution of distressed non-bank financial institutions as well as the operations of primary dealers, including the current concerns regarding Perpetual Treasuries Ltd. 

“This special meeting will be held shortly and was scheduled before the Monetary Board was aware of the unauthorised release of the draft examination report on Perpetual Treasuries Ltd.”

Primary Dealer Perpetual Treasuries Ltd., figured in the controversial bond trading that triggered an uproar in financial markets and political circles, reported a staggering after tax profit of Rs. 5.1 billion, up by over 400% in the financial year ended 31 March 2016. As per published accounts, the company had reported net interest income of Rs. 354 million against Rs. 106 million in FY15. 

However, it has enjoyed capital gains of Rs. 5.2 billion from bond trading during the year, up by 580% from a year earlier. The company, like many primary dealers, enjoys tax-free status. 

Perpetual Treasuries had connections to former Central Bank Governor Arjuna Mahendran with its Director being his son-in-law. 

Last year both the Governor and Perpetual came under fire for conflicts of interest as well as alleged irregularities in a bond issue and subsequent trading of same. The parties concerned have denied any wrongdoing although the parliamentary Committee on Public Enterprise (COPE) has extensively probed the matter and found lapses. 

Perpetual’s assets as at 31 March 2016 stood at Rs. 11.84 billion, up from Rs. 7.8 billion a year earlier. Capital and Reserves increased from Rs. 1.06 billion to Rs. 6.1 billion, inclusive of Rs. 4.98 billion in retained earnings. Liabilities were down to Rs. 5.68 billion from Rs. 6.8 billion in FY15.