CB slammed in Parliament for failure on CIFL

Wednesday, 22 January 2014 00:03 - - {{hitsCtrl.values.hits}}

UNP MP Harsha says internal CB report found collapsed finance company engaged in pyramid scheme but was allowed to list on CSE via IPO
Raises red flag over appointment of Directors at DFCC and Commercial Bank
Govt. MP Sooriyapperuma tells UNP to look beyond Colombo; says CB shouldn’t be criticised in Parliament

By Ashwin Hemmathagama Our Lobby Correspondent UNP MP Dr. Harsha de Silva yesterday slammed the Department of Supervision of Non-Bank Financial Institutions of the Central Bank and Governor Ajith Nivard Cabraal for failing to caution the general public and to prevent fraudulent finance companies from accepting deposits. During the debate on the Institute of Policy Studies of Sri Lanka (Amendment) Bill, Dr. De Silva criticised the CBSL for its failure to avoid the collapse of CIFL and for not suspending it in 2011, prior to the initial public offer. “The depositors and their families are protesting in front of the CIFL, which is bankrupt,” the MP told Parliament. “I bring to your attention the debate, which took place here in this House on 20 December 2013, where the onsite report on CIFL was tabled. In this report the Department of Supervision of Non-Bank Financial Institutions of CBSL identified CIFL as a pyramid scheme,” Dr. de Silva added. “According to this report which came out in April 2011, the overall risk exposure of the CIFL is found very high given the inadequate resources to mitigate the risks. It is also identified as a ponzi scheme with no earnings generated from over 61.4% of assets concentrated on real-estate where CIFL is dependent on new deposits to meet the expenses and the repayment of interest. “Where was the CBSL Governor who knows well about pyramid schemes? Why was CIFL allowed to continue? But in June 2011 CIFL was given a chance initiate an IPO to list itself on the Colombo Stock Exchange and also to continue canvassing for fresh deposits. There are over 4,000 depositors at CIFL and their monies are wasted. Now depositors are looking at fast unto death,” UNP MP said. Moving on to the recent pyramid scheme found operating at Hambantota, Dr. De Silva said: “Even in the President’s village, Panora and Luminous were caught operating a pyramid scheme. Luminous Sunil, the person responsible is now in custody. We disclosed the Panora and Luminous scam in this house and media reported it. But no action was taken where farmers continued to invest expecting Rs. 1,000 in return for each Rs. 100 invested. The condition of the investment to receive this profit was to read a particular advertisement in the Internet. Where was the CBSL and the Department of Supervision of Non-Bank Financial Institutions all this time? How come the Governor claims to have regulations and supervisions without flaws? “Last Sunday a leading newspaper published results of a survey that exposes public opinion about the data provided by state institutions. According to this survey, 90% of the general public holds that data provided by government institutions are unreliable. This is not a fact the Government should be proud of,” Dr. de Silva told Parliament during the debate. “Now the Government is talking about merging finance companies. Such mergers will only allow the owners and the Directors of questionable companies to get away. We can remember when shares of The Finance Company were bought at Rs. 50 through the National Savings Bank going against the market rate of Rs. 30. Today the share price has gone below Rs. 10. Now you are looking at merging TFC with a state bank. “Merging alone will not ensure return of the money to depositors. Another thing is the merger of certain banks including the DFCC and NDB. There is a law in this country that prevents a person fund guilty of financial fraud being appointed as Director. But a person who was the Managing Director of Translanka Investments Ltd., another bankrupt establishment is now being appointed a Director at DFCC. He is referred in the COPE report also. So, how can such a person be appointed for banks? We were talking about a person identified as Hula. He is also appointed Director at Commercial Bank of Ceylon PLC. All these appointments are made by the Governor of the CBSL and with full consent and approval.” In response UPFA Parliamentarian J.R.P. Sooriyapperuma requested the opposition to talk about issues prevailing in other parts of the country rather concentrating on businesses and pro-Western enterprise interests stipulated within the Colombo city limits. “Boundaries of Sri Lanka are much wider than the boundaries of the Colombo Municipal limits and 90% of our population lives in the rural, especially outside the Colombo city. The UNP should not help foreign forces to disrupt integrity. The CBSL should not be criticised and weakened in this house,” MP Sooriyapperuma added.

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