Sri Lanka’s CB governor says “I was not in the dealing room.”,rejects COPE allegations

Governor_of_the_Central_Bank_Arjuna_Mahendran

July 7, 2015 (LBO) – Sri Lanka’s Central Bank Governor Arjuna Mahendran said that he never entered the tender board room where bids were assessed but gave instructions to accept bids of 10 billion rupees or more being in the corridor outside the Public Debt Department.

He said while replying a reporter on the controversial bond auction held in February this year.

“I was not in the dealing room, Madam,” Mahendran told a reporter at a media briefing held last week in Colombo.

“I was in the corridor just outside the Public Debt Department approaching the Superintendent’s (of Public Deb) room to ask her precisely this question,”

“‘We have to raise a large amount of money for the government this afternoon’, and I wanted to ask how she was proposing to do that,”

“I was not anywhere near this electronic trading system or any of the paraphernalia that goes into the whole bidding process.”

The said bond was declared on the 27th February 2015 by Central Bank of Sri Lanka and carried accusations of insider trading.

A 30-year bond was issued on February 27 and 10 billion rupees of bids were accepted from the market after initially calling bids for only a billion rupees which resulted average yield rising to 11.73 percent from 9.00 to 9.50 percent.

It is reported that five billion rupees of the bonds was sold to Perpetual Treasuries, a company connected to Mahendran’s son-in-law, Arjun Aloysius.

Perpetual Capital group had been involved in controversial stock market deals with the Employees Provident Fund which have been questioned before.

Commenting on the Mahendran involvement in the controversial deal, he said, “It wasn’t beyond the established procedure,”

“My involvement is restricted to the extend I spoke to superintend of the debt department and querried as to how we were going to meet the gap of 10 billion rupee which was needed,”

“This was Friday afternoon remember, up to that Friday afternoon for most of the week they had only been able to raise a maximum of 3.5 billion rupees. So it seemed inconceivable that in the remainder of the Friday afternoon we could raise 10 billion,”

“And that was my suggestion to the tender board. They then had every possibility of rejecting my advice. In fact initially when they said there was 20 billion available I said, ‘you know shall we take even a larger quantity?,”

“And then they said that was not feasible because some of those bids were dummy bids etc. And when I said 10 billion then they said that is more feasible.”

“They have initially thought to take 2.6, but when I asked the question of how you raise that 10 billion, it was not very clear to me how they were going to do it. So it was bit of a coterie there and my suggestion was go for the whole tender.”

Island’s Speaker of the Parliament called a COPE report for the alleged issued while the committee appointed by Prime Minister to probe the controversial 30 year bond has found that Central Bank governor Arjuna Mahendran had no direct participation in the incident.

However, the Committee has noted serious lapses on the part of the Bank of Ceylon through whom Perpetual Treasuries had routed an unusually large amount of bids for the 30 year bond.

“I do not want to go into this as there are several reports on this, Lets move on and discuss something forward looking.”