May 3, 2009 (LBO) – Sri Lanka’s anti-bribery office is probing allegations that foreign trips were given to key officials to sweeten the sale of oil derivatives by international banks to a state-run oil firm which later went against it, a media report said. The exotic oil derivatives were sold to CPC by Standard Chartered, Citi, Deutsche Bank and two local banks, state-run People’s Bank and public listed Commercial Bank of Ceylon.
The banks sold an exotic options position called a target redemption forward, as a ‘hedge’ which involved the banks running a position for double the quantity for a longer period than the limited upside protection gained for three months.
The Sunday Island newspaper said Sri Lanka’s Commission to Investigate Bribery and Corruption has started probing oil derivative sales made to Ceylon Petroleum Corporation (CPC).
The newspaper quoted the commission’s chairman, Justice Ameer Ismail, as saying that the probe was started on the direction and information given by the country’s central bank.
The Central Bank has said the deals did not comply with prudential directions issued by the central bank and best market practices and were ‘substantially tainted’ and ordered the banks to halt the deals.