Inside Information

Aug 19, 2010 (LBO) – Sri Lanka’s Central Bank is violating its own good governance code when a pension fund it manages buys stakes in banks and financial institutions which it regulates, an economist and opposition parliamentarian said. Harsha de Silva said he was “appalled” at the statement by the Central Bank that the Employees Provident Fund (EPF) has the authority to make investments in stocks of the banking and financial sector.

“We are not opposed to EPF purchasing stock in the Colombo Stock Exchange; in fact we encourage (it),” said a statement by de Silva, an economist and member of parliament for the main opposition United National Party.

“However, we reiterate that such investments are made according to the accepted standards of ethical professional conduct.”

The EPF is the island’s biggest fund and the Monetary Board of the Central Bank is authorized to invest EPF money, most of which is in government securities.

The central bank has said it is diversifying EPF investments as falling interest rates reduces gains from government paper and to take advantage of a rally in share prices in post-war Sri Lanka.

De Silva said that his criticism of EPF trading in banking and financial sector institution stocks