Commission proposes specific procedure to appoint CBSL Governor

The Commission of Inquiry that probed the country’s largest bond scam has recommended that “relevant criteria and a specified procedure” be adopted in the appointment of a Governor for the Central Bank of Sri Lanka (CBSL).

The move follows the previous Governor Arjuna Mahendran’s involvement in the scam together with his son-in-law Arjun Aloysious, a key player in his company Perpetual Treasuries Limited according to the Commission.

Though the Commission said it agreed with the view expressed by Prime Minister Ranil Wickremesinghe that the provisions of the Monetary Law Act, the Constitution and the Law do not require that the CBSL Governor must be a citizen of Sri Lanka, it has commented on the Premier’s contention that “the very first Central Bank Governor, John Exeter had been an American national. Likewise, Mr. Mark Joseph Camey who is not a British subject but a Canadian is the current Governor of the Bank of England.”

The Commission’s report declared that “…. the circumstances in which Mr John Exeter was appointed the Governor of the Central Bank of Ceylon ( as it then was) in 1949, after the enactment of the Monetary Law Act No 58 of 1949, ( of which Mr Exeter was the principal author) can be properly compared with the circumstances which prevail in Sri Lanka in the present day. We also note, it was widely reported that, when Mr Mark Carney was appointed Governor of the Bank of England in 2013, he stated he would be applying for British citizenship while retaining his native Canadian citizenship.”

A noteworthy fact is the title of the report – Report of the Commission of Inquiry to investigate, inquire and report on the issuance of the Treasury bonds during the period from 1st February to 31st March 2016. Contrary to claims by some sections of the media, it was not a Presidential Commission but a Commission of Inquiry. The Commission’s mandate was issued under the Commissions of Inquiry Act. It appears on the front page of the report.

The Commission declared that there was a “conflict of interest” during Arjuna Mahendran’s tenure since his son- in- law Arjun Aloysius “did, in fact, continue to remain actively engaged with the operations of Perpetual Treasuries Ltd. contrary to assurance wh i ch Mr Mahendran had repeatedly given the Hon. Prime Minister.”

The Commission adds: “Next, with regard to the statement made in Parliament by the Hon. Prime Minister on 17th March 2017, in which he states inter alia, that, Mr Mahendran had not interfered in the Treasury Bond auction of 27th February 2015, we have held that, evidence establishes that, Mr Mahendran and Deputy Governor Samarasiri, deliberately and mala fide, misled the Hon. Prime Minister and suppressed material facts and misrepresented the factual position when they reported the events relating to the Treasury Bond auction held on 27th February 2015, to the Hon. Prime Minister and also when they submitted a Briefing Note to the Hon. Prime Minister, with regard to the events of that auction.

“While we do not, for even a moment, presume to make any pronouncement on events that transpired in Parliament, we consider that, the Hon. Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27th February 2015, before making any statement, instead of relying on the Briefing Note and report submitted to him by Mr Mahendran and Deputy Governor Samarasiri.

“We note that, Report of the “Pitipana Committee” did not determine that, there was any impropriety in the conduct of the Treasury Bond Auction held on 27th February 2015 and that, consequently, Mr Mahendran (who had been on leave pending the completion of the Inquiry of the “Pitipana Committee” and the submission of its Report resumed duties as Governor of the CBSL when there was no finding of impropriety.

“We consider that the position may have been different if the Committee or other body which carried out this Inquiry had the benefit of members who had knowledge and experience in the technical and practical aspects of the matter being inquired into.

“…..since no finding of impropriety or bad faith has been made against him, Mr Mahendran continued to serve as Governor of the CBSL until his term ended on 30th June 2016 and he was not re-appointed.”

The Commission was headed by Justice K. T. Chitrasiri, Judge of the Supreme Court and comprised Justice Prasanna Jayawardena, Judge of the Supreme Court and Kandasamy Velupillai, retired Deputy Auditor General.