CB outlines public debt management and control measures
The Monetary Board of the Central Bank ( CB) this week outlined measures taken to improve the management and control of the Public Debt and the Employees’ Provident Fund in the light of the issuance of the Presidential Commission report on Treasury bond issue.
The Secretary to the President has handed over a copy of the report of the Presidential Commission to the Governor on Wednesday.
Issuing a statement, the CB says it will initiate measures to carry out forensic audits in relation to the issuance of Treasury bonds during the 2008 to 2014 and the Treasury bond auctions held in March 2016.
The CB has already implemented some of the recommendations, while measures have already been initiated to implement most of the other recommendations, the statement revealed.
The Monetary Board has consulted the Attorney General, as appropriate, in the actions it has taken.
The CB considers it appropriate to keep the public informed of the status of actions and initiatives that have or are being taken on the recommendations made in the report and to generally improve transparency in the manage- ment of public debt and the Employees Provident Fund.
The report is continuing to be studied and the Monetary Board will initiate further actions, as appropriate.
Regulatory actions have already been taken against Perpetual Treasuries Ltd ( PTL) and Pan Asia Banking Corporation (PABC) based on CB investigations.
Based on the supervisory concerns and non- compliances identified in the on- site examination report of PTL and other investigations, the Monetary Board issued Directions to PTL on 07/ 11/ 2016 curtailing their levels of operation in the primary and secondary market and preventing the alienation of funds.
Based on continuing investigations, further directions have since been issued from time to time and as of now the business activities of PTL are suspended.
PTL is also prevented from the disposal of assets, distribution of profits and making payments without the prior approval of CB.
The directions are in force until July 6, 2018. CB has frozen the assets of PTL held with CB and has informed the Securities and Exchange Commission to take appropriate action with regard to assets of PTL coming under its purview.
CB investigations revealed that PABC has engaged in transactions which appeared, prima facie, to have caused significant manipulations in the Government Securities market.
The Monetary Board, after due process, suspended the business and activities of PABC on 14.08.2017 as a Primary Dealer for a period of 6 months, with effect from 15.08.2017.
A new auction system has been introduced for Primary Issuances of Government Securities and to improve secondary market for Sri Lanka Development Bonds (SLDBs).
A new system for the issuance of Treasury Bills will be introduced shortly. An electronic bidding system for SLDBs will also be introduced and secondary market activity will be facilitated.
The CB has been able to raise all Treasury funding requirements from the market without requiring the CB to finance any shortfalls in auctions since July 2017.
Voice Recording System (VRS) is used in the Front Office of the Public Debt Department ( PDD) and a CCTV system has been installed in the PDD.
Access restrictions are in place in the PDD and external visitors are required to register through a dedicated CBSL visitor registration arrangement.
Procedures including surveillance, control, oversight, security and security of data of PDD have been strengthened and further enhancements are to be implemented with expert technical assistance.
Preliminary work has commenced with the aim of implementing an Electronic Trading Platform and Central Counter Party ( CCP) to reduce risk to counterparties.
The directions are in force until July 6, 2018. CB has frozen the assets of PTL held with CB and has informed the Securities and Exchange Commission to take appropriate action with regard to assets of PTL coming under its purview.