UNP hails IMF’s dig at governance over EPF investments in banks

The main opposition United National Party (UNP) yesterday welcomed the IMF’s comments flagging off governance and transparency issues with regard to investments in banks by Employees Provident Fund (EPF).

“We are glad that even at this late stage the IMF has acknowledged the seriousness of the governance and transparency issue with the Central Bank using EPF funds to trade in shares of commercial banks,” UNP MP and Consultant Economist Dr. Harsha de Silva said in a statement yesterday.

He was responding to media reports quoting  IMF’s mission chief for Sri Lanka Dr. Brian Aitken as saying “...investing EPF funds in banking stocks could be misconstrued and raises the potential for negative perceptions”.  

In his statement Dr. de Silva also said “We wish to note that the UNP has on many occasions brought up the issue of justifiable perceptions of conflicts of interest of these trades given the Central Bank has advanced and detailed information on commercial banks that is not available to the rest of the market.  

We also questioned how the Securities and Exchange Commission could pursue alleged insider traders at the Colombo Stock Exchange when the Central Bank was violating its own investment regulations and standards of professional conduct.”

“Furthermore, we have continued to point out that the EPF with several other entities such as the National Savings Bank, Bank of Ceylon and Sri Lanka Insurance Corporation etc., owned by a single shareholder, that is the Government of Sri Lanka, have now together taken ownership of a number of private commercial banks beyond the 10 percent limit (or 15 percent with the approval of the Monetary Board) allowed by the Banking Act.  We have seen in the recent past how the Government has begun to politicise their Boards and interfere in the management of these banks. Here again, sadly, the regulator seems to be ignoring the rules that are supposed to be adhered to.”

“We are of the view that this breakdown of governance at the CSE does not augur well for the future of the capital markets in Sri Lanka.  Instead it will create a negative perception among respected investors leading to a slowdown in investments into the country,” Dr. de Silva warned.

“Let us see how the Central Bank and the SEC view the IMF position on the subject and what immediate steps would be taken to rebuild much needed governance in the Colombo stock market,” the UNP’s statement added.