The Monetary Board and the Central Bank of Sri Lanka should be held responsible for the loss incurred by the questioned issuance of 30-year Treasury Bonds in 2015, retired former Deputy Governor Dr. W. A. Wijewardena said yesterday.
It was also insisted that the position is his personal opinion only. Former DG Wijewardena said according to his calculations, the immediate loss due to the questioned transaction is Rs.532 million and the long term loss would run up to Rs.10 billion.
Dr. Wijewardena pointed out to the Commission that the CBSL officers who testified before the Pitipana Commission, have been of the viewpoint that there have been no loss incurred by the questioned treasury bond issuance.
Dr.Wijewardena also said the decisions to do away with the 5% interest rate provided for commercial banks and to accept 10.5 billion through 30 year bonds, resulted in all the structures of interest rates having gone high.
He said every officer in the CBSL is fully qualified in their education and professional expertise, so that they are responsible to notify regarding a discrepancy as all of them are expected to exercise ‘due diligence’ . “If someone is to rob our workplace, we cannot ignore the attempt saying it is the responsibility of the security service,” Wijewardena emphasised .
Dr. Wijewardena was testifying before the Presidential Commission inquiring into the Treasury Bond issue. Apart from being a senior Central Banker and as the longest served Deputy Governor of the Central Bank, Dr.Wijewardena has been the expert advisor to the Gamini Pitipana Committee and the first COPE subcommittee chaired by D.E.W. Gunasekara that probed into the Treasury Bond issue.
Dr.Wijewardena also said the Treasury Bond Tender Board is also responsible for the loss incurred by the issuance of 30 year Treasury Bonds on February 27, 2015. He said the Tender Board should have referred this to the Finance Ministry Secretary regarding its position.
Asked if there is a culturally reverential acceptance of a Governor’s decision, Dr.Wijewardane answered in the affirmative. “The Governor has enormous power within the CBSL. When a Governor walks into a meeting, the officers can be under pressure .The officers will yield to what the Governor says,” he said.
“In my long career, there were two Deputy Governors detached from their positions due to going against the Governor’s decision,” he explained.
It was observed at the Commission, if that would be the culture within the CBSL, would any officer or committee go against the former Governor’s decision as well.
Former DG Wijewardena also said that he believes former Governor Arjun Mahendran is also responsible for failing to obtain the approval from the Monetary Board on suspending the direct placement method. Former Governor Mahendran should have properly given the rationale behind making such a decision.
Doing away with the direct placement method is not within the purview of the Governor, Dr. Wijewardena further said. He also said the direct placement method is an artificial manipulation of the interest rates, which is not conducive to an economy in the long run.
Dr. Wijewardena also said that the stoppage of direct placement method should have been one of gradual stoppage. When it was abruptly stopped, the market is at a shock, he explained. He also said in an auction dominated hybrid system, the direct placement method should be used as a control measure.
He pointed out the Treasury Bond auctions that took place in March 2016, gives a fine example as to how the CBSL was at the mercy of Primary Dealers.